When Deciding to Buy a New Home, Consider These Home Financing Tips

When Deciding to Buy a New Home, Consider These Home Financing Tips

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Home financing is often sought out by those who can’t afford to make lump sum cash payment at a go. Hence, they borrow part of the property’s asking price from a lending institution such as the bank in what is commonly referred to as a mortgage.

Mortgaging Opportunities

Though there are some conventional lenders who offer 100% financing for individuals interested in buying new homes, typically this privilege is availed through state-sponsored programs like the Veteran’s Authority loan program.

FHA also provides loans with rates as minimal as 3.5% for people who can’t afford making large down payments, or those who may be facing challenges accessing credit through conventional lending methods.

Nevertheless, most government backed programs require that home buyers pay for mortgage cover policy, which typically protects the lender when buyers fail to meet their loan obligations. Such reduced risk gives home financiers the motivation for providing generous financing packages to customers.

Popular home financing options

a) FHA Loans

Also known as Federal Housing Administration loans, they were introduced to help people afford homes. They require lower down payments compared to other types of mortgage.

You can either choose from a fixed or adjustable rate loan. The first option allows you to make the same payment sum each month for the entire lifespan of your loan, while the other one varies from month-to-month depending on government interest rate changes.

If you have bad credit scores or it’s the first-time you’re buying a home, then this could be the best option available when looking for low interest loans.

b) VA Loans

Veterans Affairs loans are solely given to those that have worked in the military; they are available to those who want to buy a new home or upgrade an existing one.

The maximum sum one can get for this financing option is $417,000.

Fixed and adjustable rate loans are available. With negligible interest rates and federal government guarantee, they often tend to cost less than other conventional loans.

c) Conventional Loans

They are granted by banks and lending institutions, though not guaranteed by the state itself. This means that lenders can take a major loss if they default on paying their loan.

However, to safeguard their interests they may charge higher interest rates. Those with poor credit scores may also not qualify for it.

Summary

Even if you’re lucky enough to get 100 percent mortgage financing from a lending institution, they aren’t always the best financial option for getting a home. Meeting the traditional 20% down payment means avoiding costly mortgage insurance rates.

For more tips on how to access money for buying a new home please feel free to visit our blog. Share it with friends on social media via your facebook or twitter accounts so that they can also benefit from this information and give more advice if necessary.

References
investopedia.com/articles/mortgages-real-estate/08/homebuyer-financing-option.asp

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Categories: Home Financing

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