There has never been a better time in the history of mortgage loans for people with good credit, a down payment, and sufficient job history to get a home loan. Mortgage interest rates are the lowest they have ever been. The best way to get the best interest rate, and the lowest price on your home loan is to compare multiple banks. There are different kinds of banks and different loan programs. You’ll find the best deal and get the lowest up front costs when you let banks compete. Complete this form below to find the best mortgage interest rates possible:
There are several different types of home loans, and some products are better or worse for different situations. Here is a basic breakdown of some of the most common types of home loans.
Conventional Home Loan
This is the standard home loan used by people with good credit, a 20% down payment, and at least two years worth of job history. Most of the time when you see advertised interest rates, this is for conventional home loans. The big advantage of conventional mortgages is that there is no Mortgage Insurance required. When you can buy a home with a conventional home loan, your closing costs and monthly payment will be less do to not paying mortgage insurance.
During the housing boom many people were able to buy real estate with no money down because they used 80/20 home loans. This meant that there were actually two loans, a first and a second, on the house. The first conventional loan was usually the best rate possible. The 20% portion of the home loan had a slightly higher interest rate. Even though the second loans interest rate was higher, it was still less expensive than paying for mortgage insurance. Due to the incredibly high rate of default on these type of loans, 80/20 loans have practically died.
Conventional loans typically come in 30 year terms, but 15 year terms are also quite common for people who want a little better interest rate, and want to pay their home off twice as fast. Some banks also offer different term lengths such as 20 and 40 year home loans. Many conventional loans aren’t actually kept by the bank who originates them. It’s very common to have your home loan sold to a different bank for servicing.
FHA Home Loans
FHA home loans are loans that are guaranteed by the Federal Housing Administration. These loans are usually the most common type of mortgages for people who only have a small down payment. Most banks can offer FHA home loans, this became a necessity when lending standards changed, as most first time home buyers have a hard time coming up with a down payment.
Because the Federal Housing Administration try’s to promote home ownership, the qualifications for these loans are less strict (although more hoops are required to get them). Credit scores do not need to be as high for FHA loans as they do for conventional loans. Based on the area you live in, there are borrowing limits based on median home prices in an area.
The big disadvantage of FHA loans is the expensive Mortgage insurance. With FHA mortgage insurance reserves running dry, both the upfront and monthly rate continues to rise. This ads significant expenses on the monthly payment.
VA Home Loans
VA loans are loans for those who are currently or have served in the Military. The big advantage of VA loans is that it allows veterans to purchase a home with no money down. This loan does require a slightly larger up front VA funding fee, but there is no monthly private mortgage insurance with VA home loans.
Home Equity Loans
Home Equity Loans are much different than purchase or refinance loans. With these loans you simply borrow money, and put your house as collateral against default. The advantage of home equity loans is that by using your house as security, you are able to get less expensive interest rates than you would with personal home loans.
To get a home equity loan, you need to have lots of equity in your home. It used to be that you could borrow more than the value of your home. Now you can usually only borrow up to 80% of your homes value. As in the total amounts of all of your mortgage loans can only equal 80% of your homes current appraised value.
Home Loans for People With Bad Credit and No Down-payment
Half a decade ago almost anyone who could breathe could get a home loan. This is one of the reasons we saw the boom and collapse of the housing market. Loan origination standards are much tighter than they were seven years ago, but many states now have special programs that offer 100% financing and or down payment assistance. The VA loan, for veterans, and the FDA rural housing loan (for home purchases in rural areas) are two federal loans that permit no down payment and or 100% financing.