There are a number of loans to choose from when purchasing a home, so it’s important to understand each type before you decide. Depending on the type of mortgage you choose, you’ll have different requirements that influence your rate, loan terms and your lender. Here’s some advice that we hope will help you navigate the twists and turns of the home loan process and have you kicking back and enjoying your new McAdams home in no time.
Requirements to get a mortgage. Taking the time to carefully review your finances, including your monthly income and debts, credit score and your estimated down payment all factor in to determining the type of mortgage you qualify for:
Conventional mortgages. Although this is the most common type of mortgage, they do have stricter regulations on your credit score and your debt-to-income (DTI) ratio. Conventional loans are a good choice for most borrowers who want to take advantage of lower interest rates with a larger down payment. If you can’t provide at least 3% down and you’re eligible, you could consider a USDA loan or a VA loan.
Fixed-rate mortgages. This type of loan has the same interest rate and principal/interest payment throughout the duration of the loan. The amount you pay per month may fluctuate due to changes in property tax and insurance rates, but for the most part, fixed-rate mortgages offer you a very predictable monthly payment. A fixed-rate mortgage might be a better choice for you if you’re currently living in your “forever home.” A fixed interest rate gives you a better idea of how much you’ll pay each month for your mortgage payment, which can help you budget and plan for the long term.
Adjustable-rate mortgages. This type of loan is the opposite of a fixed-rate mortgage is an adjustable-rate mortgage (ARM). ARMs are 30-year loans with interest rates that change depending on how market rates move. Adjustable-rate loans can be a good choice if you plan to buy a starter home before moving to your forever home. You can easily take advantage and save money if you don’t plan to live in your home throughout the loan’s full term.
Government-backed loans. Each government-backed loan has specific criteria you need to meet in order to qualify along with unique benefits, but you may be able to save on interest or down payment requirements, depending on your eligibility. These type of loans include: FHA, VA and USDA.
Applying for a home loan can feel daunting and deciding which type of mortgage best suits your needs early on will help direct you to the type of home you can afford. As a prospective home buyer, it’s just as important to research different types of mortgages as it is the neighborhood where you want to live. At McAdams Homes, we know that applying for a home loan can be complicated, so we offer specially curated communities in the Wilmington, NC area, click here for current incentives. Or if you own a preferred lot, you can choose from our portfolio of floor plans to personalize with numerous design options. Contact us today to get started on your new home journey!