5 different types of home loan that you can buy & their benefits
Buying a new home is not easy. There are several important points that you must take into consideration in order to get the best for yourself. Finance is one of them. Even if you have sufficient funds to pay for the house in full, taking a home loan is a smart move. It not only improves your creditworthiness but also comes with tax benefits.
Below are five types of home loans & their benefits:-
Fixed Rate - A fixed-rate loan is a home loan that consists of monthly payments at a single interest rate for the entire life of the loan, which is usually 15 to 30 years. The rise and fall of interest rate do not change the terms of your loan, so you always know what to expect. The loan is ideal for home buyers who are craving predictability and not planning to move anywhere soon.
Bridge Loan - Also known as caveat and swing loan, a bridge loan is a short-term loan that allows borrowers to meet their short-term liquidity requirements. It essentially means wrapping your current and new mortgage into one payment. The loan is ideal for homeowners with excellent credit score and a low debt-to-income ratio, who are looking to purchase a new home before selling their previous residence.
ARM - Adjustable-Rate Mortgage or ARM is a type of home loan in which the interest rates keep fluctuating throughout the lifespan of the loan. The initial interest rates are usually lower than what you get with a fixed-rate loan. This rate is fixed till a limited time period, after which it keeps on changing periodically. Your payments will be adjusted in correspondence to then rates.
FHA Loans - These loans are insured by Federal Housing Administration (FHA) for stimulating the housing market by making loans accessible and affordable. People who have less than stellar credit or a low down payment can qualify for this loan. It is widely popular among first time home buyers as it requires a comparatively lower down payment.
FHA 203K loans - The goal of this loan is to provide sufficient funds to debtors for buying a damaged or old home and redoing it. It usually comprises of a 20 percent contingency fund in case the remodeling costs more than the estimated amount and a provision of approximately six months of mortgage payments so that the borrower can stay somewhere else while the remodeling work is going on.
Looking to buy a home in Newark, CA? Partner with a realty expert today to discuss your best possible financing options!