Primary Categories of Home Loans
Repaying a home loan requires a long-term commitment on your part. Considering the fact that the length of the average home loan can be as long as 15 to 30 years – or even longer in some cases – it is important to consider all the options you have and choose a loan that is well-suited for your needs. Let us take a look at the different categories of mortgages available for homebuyers.
In this type of home loan, the rate of interest – once fixed – remains unchanged for the entire length of the loan. The lender cannot arbitrarily increase or decrease the interest rate at any point – irrespective of how the housing market performs.
In this type of home loan, the rate of interest tends to increase and decrease at regular intervals throughout the duration of the loan. The initial rate of interest, however, tends to be lower than that of a fixed-rate mortgage and it remains unchanged for a specific period of time – typically five years – after which it starts fluctuating depending on market conditions.
Conventional Home Loans
These are home loans that are offered by private institutions like banks and credit unions. These loans tend to have strict eligibility criteria, as they are not backed by any governmental agency. Only those with a good credit score and low levels of debt can qualify for these loans.
These are home loans that are subsidized and insured by governmental agencies like the Federal Housing Administration (FHA), the United States Department of Agriculture (USDA), and the Department of Veteran Affairs (VA). These are ideal for those who might not qualify for conventional home loans due to their bad credit history.
These are home loans that follow the guidelines set by the Federal Housing Finance Agency (FHFA). They are designed to suit the needs of the average homebuyer.
These are home loans that do not follow the guidelines set by the FHFA and are specifically designed for high-net-worth individuals who want to buy high-priced properties.
Prime Choice Funding is here for you. If you are planning to purchase a new home or refinance your existing home, we can help with your homeownership goals, call us at (877) 787-7463 or contact us here.