How to Know Which Home Loan Is Right For You

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Are you a first time homebuyer? What is your credit score?

First time homebuyers have a number of options available to them. There are many low down payment financing options available. FHA loans generally have a lower interest rate for qualified buyers. There are state and local down payment assistance programs. Some programs allow for down payments in the form of a gift. FHA loans are ideal for borrowers with less than stellar credit. Borrowers with excellent credit scores can get better rates and terms.

Do you have money for a down payment?

Conventional loans generally require 20% of the purchase price as a down payment. FHA, USDA, VA and some conventional loan programs require as little as 3% down. There are state and local down payment assistance programs available to many borrowers. Remember the more you are able to put down up-front the less your monthly payment will be. But exhausting your savings on a down payment may not make the most sense for your situation.

Are you a Veteran?

The Veterans Administration has an excellent loan program for veteran’s, current servicemembers  and qualified surviving spouses. VA Loans are backed by the federal government’s VA Home Loan Guaranty, which assures lenders that should you default, your loan would be covered. With less risk, the lender is able to be more flexible with loan terms. Qualified buyers may borrow up to $417,000 with no down payment and finance up to 100% of the purchase price. There is no monthly mortgage insurance premium and the VA Loan Guarantee fee may be rolled into the financing. Vet’s can purchase or build a new home or condo, obtain a lower interest rate with an Interest Rate Reduction Refinance Loan or IRRRL, or use the equity in their home to obtain a cash-out refinance to consolidate debt, make education payments, or make energy-efficient improvements to their home.

How long do you plan to remain in your new home?

How long you intend to stay in your home can have real bearing on the type of loan you might consider. For example if you knew you’d remain in your new home for less than seven years you might want to consider an adjustable rate mortgage to get a lower rate and a lower monthly payment over the short term.

Should I purchase points?

If you’d like to get an even lower rate you may want to consider purchasing a point(s). Each point equals 1% of your loan amount. For example, 1 point on a $200,000 loan would cost $2,000. These points lower the interest rate for the entire term of the loan and may even be tax deductible. Consult your tax adviser to see if you qualify. Before you consider buying points consider how long you plan to remain in your home. Your Mortgage Specialist can help you determine how long it would take to recoup the money you’ve paid for point(s). If you don’t intent to stay in your home or if interest rates are high, buying points may not be wise.

Whether you’re buying or refinancing, Embrace Home Loans has the answers you’re looking for and the information you need to make the right choice.

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