When looking for a new home, many envision sparking kitchens, huge master bedrooms and enticing family rooms. Don’t forget one of the most important steps, the financing.
Mortgage loans come in many sizes and shapes.
Conventional Loans. This is your typical mortgage loan. These loans often require a down payment of more 10 or 20 percent of the purchase price. They are designed to be sold to Freddie Mac and Fannie Mae. Conventional underwriting rules may be very strict and involve fees.
Down payments of less than 10 percent often require the purchase of expensive mortgage insurance.
VA Loans. These loans require no down payment, but you must be veteran to qualify.
FHA Loans. Federal Housing Administration loans may require a minimal down payment and are more accepting of applicants with credit blemishes.
Construction Loans. Useful if you are building a home yourself or working with a custom builder. These loans often provide short term funds designed to help you through the building of the structure. They then convert to a 15 or 30 year permanent loan.
Bridge Financing. Bridge loans are typically short term loans that are designed to help a buyer bypass a timing issue. This may happen when a buyer is purchasing a new home but hasn’t sold his present home and does not have enough money to close on the new property.
Regardless of what type of loan you utilize, it is extremely important for you to understand how much it costs and what your obligations are with regard to the loan. This knowledge will help you to navigate the purchase of your new home more effectively, efficiently and successfully.