Popular Loans for Buying a Home

Understanding Different Types of Home Loans: A Guide for Homebuyers

Finding a great deal on your home purchase requires understanding the various types of home loans available. Here are popular mortgage products and who can use them.

Conventional Loan

A conventional loan is the most popular type of loan and the one most people think of when beginning their home search. To get a conventional loan, you should have a sizable down payment (20% of the purchase price is typical, but you can have a lower down payment if you are willing to pay for private mortgage insurance), a high credit score, and a low debt-to-income ratio. If you choose a fixed-rate conventional loan, your interest rate will lock in at the time of purchase and remain the same for the entire loan.

USDA Loan

A USDA loan is a government-secured loan, meaning that the USDA guarantees the lender will be paid as an incentive for people who purchase in rural or some suburban areas. You do not need to have any money for a down payment and are not required to pay PMI, but the home must be in an area that qualifies for this type of mortgage. Additionally, you must have good credit. Consulting with Oak Capital Mortgage can help you determine if a USDA loan is right for you.

VA Loan

Another government-secured mortgage product, VA loans are available to veterans, military members, members of the National Guard, and some surviving military spouses. You will pay a small fee to cover processing, but you do not need to have a down payment or pay PMI. There are a few restrictions for how you can use a home purchased with a VA loan, such as a 60-day move-in timeline requirement and a primary residence requirement. Oak Capital Mortgage can assist veterans in navigating the specifics of VA loans.

FHA Loan

An FHA loan is a great option for those with less money for a down payment or a lower credit score. You can put down as little as 3.5% using an FHA loan, but you will often pay for mortgage insurance for the life of the loan. This type of loan is ideal for first-time homebuyers who need more flexible lending criteria.

Jumbo Loan

If you are trying to purchase a very expensive home, you may need to use a jumbo loan. The terms are often similar to a conventional loan, but with higher loan limits. Jumbo loans typically require a higher down payment and excellent credit.

0% Down Payment Options for First-Time Homebuyers

For first-time homebuyers, there are several options available that require no down payment. USDA loans and VA loans, as mentioned earlier, are two such options. Additionally, some local and state programs offer assistance to first-time buyers, providing grants or loans to cover down payments and closing costs. Exploring these options with Oak Capital Mortgage can help you find a 0% down payment loan that fits your needs.

Conclusion

Discussing your options with a knowledgeable lender is crucial to determining which mortgage product will work best for you and your new home purchase. Oak Capital Mortgage offers expert advice and support to help you navigate the various loan types and find the perfect fit for your financial situation. By understanding your options, you can make an informed decision and move confidently towards homeownership.