The Different Types of Home Loans for Buyers

Financing terms are the nuts and bolts of a successful home purchase. Once you’ve decided you’re ready to buy a house, it’s a matter of making the numbers work. So, which home loan is the right one for you? Knowing the different types of mortgage loans available to you will allow you to pinpoint the one that best fits your needs and is financially viable.

The Different Types of Home Loans for Buyers

Conventional Loans

Conventional loans are the most popular type of home loan issued to borrowers. Offered by private lenders, they are not backed by the government. Conventional mortgages divide into two subsets: conforming loans; which adhere to Federal Housing Financing Agency (FHFA) guidelines, and non-conforming loans; which do not. Due to the added risk taken on by the lender, non-conforming loans typically have higher rates. A jumbo loan is an example of a non-conforming loan, due to its loan amounts being higher than the amount limits laid out in the underwriting guidelines. The two most common conventional loans are 30-year and 15-year fixed-rate mortgages.

15-Year and 30-Year Fixed-Rate Mortgages

The terms of your loan will drastically impact all aspects of your mortgage. With a 30-year mortgage, you’ll have lower monthly payments and a higher interest rate than you’d have with a 15-year mortgage, meaning you’ll pay more in interest over the life of the loan. With a 15-year mortgage, you’ll pay less interest, but you’ll have a higher monthly payment. Compared to a 30-year mortgage, a 15-year mortgage can save you money over the life of the loan, simply because you’re in debt for half the time; however, the higher monthly payments may be unaffordable for some.

Government-Backed Loans

Whereas conventional loans are not backed by a federal entity, there are several unconventional loans that are backed by the U.S. government. These unconventional loans can often provide a path to homeownership for borrowers who don’t have the credentials to qualify for a conventional loan.

FHA and USDA mortgages are two common types of government-backed loans. Instead of having to make a 20% down payment on a conventional loan to avoid private mortgage insurance (PMI), an FHA loan allows buyers to qualify for a mortgage with a down payment as little as 3.5%. USDA loans enable buyers to purchase a home with reduced interest rates. VA loans offer several benefits for active service personnel and veterans looking to buy a home, including not having to purchase mortgage insurance.

Fixed-Rate vs. Adjustable-Rate Mortgages

Fixed-rate mortgages allow you to lock in a specified interest rate for the life of the loan. With an unchanging monthly mortgage payment, a fixed-rate mortgage makes financial planning easier. Adjustable-rate mortgages’ interest rates will go up and down based on market conditions. Many ARMs will start with a fixed-interest rate period followed by a variable interest rate until the loan amount is paid off. Keep in mind that a sudden change in your financial situation could make your monthly ARM payments unaffordable, which could result in a loan default.

Other Home Loans

There are other more niche financing options available for prospective home buyers. For example, a construction loan can be useful if you’re planning on building a home. Balloon mortgages and sub-prime mortgages can make homeownership feasible for those who aren’t financially prepared for the typical repayment structure of a mortgage. These loans, however, come with greater risks. Talk to a mortgage broker to understand the terms of these agreements before making a final decision.

3 Wonderful Reasons Why The Holidays Are A Good Time To Sell Your House

Should you sell your home during the holidays? 

It may not be the ideal time, but with the delay in the spring market due to COVID-19 that caused pent-up buyer demand, many people’s search for their dream home continues even during this busy time of the year. 

Here are three huge reasons not to wait until the next year and consider listing your home during the holiday season:

1. Those who are house-hunting are committed and serious to buy.

Despite this busy time of the year, buyers who have been actively looking for their dream home are serious and ready to buy. They also want to take advantage of the historically low mortgage rates so they continue to be on the lookout. 

Holiday buyers are also more motivated to move on the right home especially if they’ve been purposefully searching since fall or they need to relocate as soon as possible, making them easier to negotiate with and more eager to close the sale.

2. There’s less competition for you as a seller.

The holidays might look like an unexpected time to list your home, but in reality it’s actually more favorable. There are fewer homes on the market to satisfy buyer demand, giving your house a chance to emerge as a good (if not the best) option for motivated buyers. The minimal competition and huge demand can lead to multiple offers that would help you make a sweet sale.

After the holidays, there’ll be more homes that will be available in the market. Builders’ confidence is also ramping up in many states, which means more new construction will be available for sale. If you’re still contemplating on whether to list your home, with these stats in mind you might want to make the holidays an opportune time to finally sell. Sell my house fast in Tampa

3. Homes decorated for the holidays are more appealing.

You’re already cleaning, organizing, and decorating your home for the holidays, which means there’s no better time to show if off than now. A holiday-decorated home gives off a homey, comfy vibes that stirs warm memories, no matter what we’ve been through this year. Buyers will be more likely to imagine themselves celebrating festive times and making memories with their loved ones in their potential new home.

If you live in a snowy state and worried that it might be more difficult to entice potential buyers, remember that just keeping the sidewalk and driveway clear of snow and ice can already make a huge first impression. During a showing (whether it’s virtual or in-person), you and your agent can set the mood with festive holiday lights and decorations that will make your home more attractive. Plus, with many people adorning their homes, your neighborhood will be more appealing, giving buyers a chance to see it in a different light.

Bottom Line

Despite the prospect of shorter days and colder weather (in many parts of the country), selling your home during the holidays presents numerous opportunities. Moreover, there’s a huge potential for a greater and faster real estate deal because of the serious buyers and fewer seller competition. If you’re already determined to sell this holiday season so you can celebrate at your new house, connect with a local real estate agent who will help you turn any potential challenge into an opportunity and make the most out of your biggest investment.