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Continuing our fixed rate repayment mortgages, focusing on mortgage options for residential properties:
Fixed-rate mortgages have been available for homeowners almost as long as lending institutions have been in business. In times of fluctuating markets and unstable economies, fixed-rate mortgages offer homeowners the peace of mind that comes with being able to budget a house payment for the duration of the loan. In the long term, fixed rate loans tend to be the safest types of loans. Fixed-rate mortgages come in a variety of forms.
Conventional Financing
This is the most common option for home loans. Conventional loans represent 75% of all home loans. These loans typically come in terms of 30, 20, 15, or 10 years. A 30 year term is the most popular option, but a 15 year term will build equity in the home much faster. This type of financing can be used for owner occupied properties, investment properties and second homes.
Government Financing
Government loans are an option available to homeowners. VA (Veteran’s Administration), FHA (Federal Housing Administration) and USDA (United States Department of Agriculture) are loans back by a government entity. Since these loans are a good choice for first time homebuyers, terms of 30 years and 15 years are available. This type of financing can only be used for owner occupied properties.
Both types of financing have guidelines based on a borrower’s down payment, credit scores, and debt in relation to income (ratios).
In our next installment, we will dive deeper into the pros and cons of conventional versus government loans, comparing the differences in down payment requirements, credit score guidelines and ratios.
Donita Stubbe
Single Family Lending Manager
donitas@frontierbk.com
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