You decided you’re ready to buy a home! Congratulations! Whether this is your first time purchasing a home or your third it’s an exciting time! A very important part of home buying is choosing a mortgage loan. There are many options out there to finance a home purchase. How do you know which mortgage loan is best for you? Think long term to decide which loan type is the best for you and your family years down the road. We’ve listed the basics of the five most common mortgage loan types. The mortgage lender we work closely with can guide you even further to find the right mortgage loan for you throughout your home buying process. Contact them here!
Conventional (Fannie Mae & Freddie Mac)
The conventional mortgage loan is the most common option to finance a home. It features fixed rate and adjustable rate mortgages (ARM). In a conventional loan, credit, income, and property requirements must meet guidelines set by Fannie Mae and Freddie Mac. Typically, a conventional loan offers the best interest rates. Other important conventional loan information:
- Down payment is typically 10-20%
- For first time buyers, a down payment as low as 3% is accepted
- Private Mortgage Insurance (PMI) is applied until 20% of the home is paid off
FHA stands for Federal Housing Administration. This is a government insured loan that benefits both first time and repeat homebuyers. You don’t have to have perfect credit in order to apply for a FHA loan. What else to know about FHA loans:
- Down payment can be as low as 3.5%
- PMI still applies
VA loans are designed specifically for veterans and active duty military members. The Department of Veteran Affairs insures these loans. Applicants for this loan do not need perfect credit in order to be considered. In order to apply, you would need to obtain a Certificate of Eligibility (COE) that proves you are eligible for a VA loan. The benefits of VA loans include:
- 100% financing available
- No PMI
- Some surviving spouses of veterans can benefit from the VA loan
The US Department of Agriculture has a program that offers home loans to help home ownership in rural areas of the United States. There are specific guidelines the buyer must meet in order to receive a USDA loan.
- Must live in a qualified rural area and earn the median income or less
- 100% financing available
A THDA loan is offered by the Tennessee Housing Development Agency specifically for first time homebuyers in Tennessee. This loan is a 30 year fixed rate mortgage and offers a down payment assistance program. To qualify:
- Household income must not exceed a certain limit (limit varies by county)
- Home purchase price must not exceed certain limit (limit varies by county)
This fundamental information should help you start that process in deciding which mortgage loan is right for you. An important first step to buying a home is getting pre-qualified for a home loan. This greatly helps everyone involved in the home buying process! Doing this will also help you determine exactly how much house you can afford. You can get pre-qualified by contacting a mortgage lender.
See homes for sale in Williamson County UNDER $300,000 below. Find homes for sale under $300,000 by CITY in Williamson County HERE.