If you are a first-time homebuyer, you might be wondering what kind of loan is best for you. There are different kinds of loans that the mortgage lenders offer, and each one will have different benefits. Here is some information about the different kinds of loans so you can choose what is best for you.
1. Conventional Loan
Conventional loans are probably the most common type of home loan. This is a loan where you get a fixed interest rate for the life of the loan. The two most common durations are 15 years and 30 years. This means that if you choose a 30-year fixed-rate loan, you will get assigned an interest rate for the loan, and that rate will stay constant for the full 30 years.
Conventional loans are most desirable for many people since they are a safe bet, but they can be hard to get approved for if you are an unconventional applicant. For instance, if you are self-employed, receive most of your income from investments, or don't have a long job history, you may not be able to get a conventional loan. This is because conventional loans have the most rigid standards. You must meet certain criteria to prove income, have a certain amount of time at your job, follow a strict equation when it comes to debt-income, and so forth.
2. Adjustable-Rate Loan
Another type of loan is an adjustable-rate loan. Usually the standards for getting an adjustable rate loan are the same as for a conventional loan—quite rigid—but the difference is that your initial interest rate will be less for a couple years, then it will raise over time. The reason people do this loan is if they know they are going to be somewhere for only a short period of time. For example, if you are on a work assignment for 3 years and then you know you will be relocated, you might choose an adjustable-rate loan. This loan can be risky if you can't sell the house, but it is good initially.
3. Stated-Income Loan
If you can't meet the requirements for a conventional loan, you might consider a stated-income loan. This is a loan where you simply show bank statements or tell them your income, and the lender will give you a loan. However, the interest is usually much higher. This is ideal for people who can't get a home loan the conventional way.
By understanding the different types of loan you can choose what is best for you. Contact a lender like Premium Mortgage Corp for more information.Share