Home Buying For First Time Buyers (Part 3)
Welcome back! Now that you've budgeted your down payment and are sure that buying a home is the right move for you; Let's look into one of the next steps into buying a home. That is getting pre-approved for a mortgage loan.
Step Three: Getting A Mortgage Loan
The lender will approve you based on your credit score and other factors we've mentioned in previous articles. Mortgages are very similar to car notes. You take out a loan to fund your big purchase, and over time you pay off the loan. Let's look into the three most common loans.
1. Conventional Loans
Conventional loans, also known as conforming loans, are loans that are supported by private lenders like banks, credit unions, Freddie Mac, and Fannie Mae. Most mortgages in America are conventional loans. In some cases, buyers may be able to receive this loan with only 3% down.
2. FHA Loans
The loans are backed by the Federal Housing Administration. Since this loan is secured by the government, it is considered a low risk for lenders because they are insured and protected if the borrower fails to make payments. FHA loans give buyers with lower credit scores a chance to buy a home at as little as 3.5% down.
3. VA Loans
These mortgage loans are for veterans. The most popular benefit to the VA loan is that it usually requires a no money down payment on obtaining a mortgage. The interest rates are usually lower on these loans.