Did you know that there are different types of home mortgage loans out there? For first time home buyers, it can be a little stressful and confusing when confronted with different types of loan, that is why it is best to chat with a trusted mortgage lender before looking at homes so the financial, and honestly, the most confusing part of the home buying process is secured. Sellers also like this quality in a buyer, and in this market, it is always a plus to be ahead of the game!
So, what are the types of loans out there? Now, as a real estate agent, I cannot go into great detail on what each type can offer you specifically, but I can give a brief overview of each. This is some exciting stuff, y’all!
Let’s start with the most common home loan that I am sure everyone has heard of: the conventional loan. Conventional loans are a non-government funded loan. It is typical to have more cash down, like 20%, to be qualified for this loan and usually one needs a decent credit score. However, if one does not have 20%, but maybe 5-10%, some lenders are able to provide this type of loan still, but you would pay PMI until you have 20% equity in the home. PMI stands for Private Mortgage Insurance, and it can be a pretty penny added to the monthly payment, but this is protection for the lender incase you default. The nice thing, though, is that it eventually goes away and then you have a smaller monthly payment!
The next loan type there out there and is more common for first time home buyers is the FHA loan. FHA stands for Federal Housing Administration, and this IS a government funded loan. A buyer can put less down, like 3%, but the buyer would pay PMI the entire duration of the loan, even after 20% equity. This is great for a first time home buyers because it is easier to get into a home without having so much money down. Usually, this will be someone’s first home, they obtain that glorious equity, sell, and put that 20% down payment on a new home from the sale of that other home, and it may be more suitable for their lifestyle now. It is all about that American dream!
The other home loan out there is very similar to the FHA loan and that is the VA loan, or Veterans Affairs. There are, you guessed it, loans guaranteed for our amazing veterans! These are great home loans. With a VA loan, the buyer does not have to have any down payment, they have better interest rates, and there is NO PMI. Now that is great and a much-deserved benefit for America’s veterans!
FHA and VA loans have the home set to a higher standard. So, in other words, no huge fixer-uppers will fly with this loan type. There is also loans such as rural development loans which have stipulations on the type of home and locations.
So, if you are wondering what loan type would work for you, let me know! I work with some incredible lenders here in Cheyenne that would help you get that first step to home ownership done in no time!
PS: Ask about our Wyoming only programs here like ‘Welcome Home Wyoming” and “WCDA,” that help with down payment even further and closing cost coverage!