When it comes to purchasing a home, one of the most important decisions you'll make is how to finance it. There are several different types of home loans available, each with its own advantages and disadvantages. Here's a closer look at some of the most common types of home loans:
- Conventional Loans: Conventional loans are a popular choice for homebuyers and are offered by private lenders. These loans typically require a down payment of at least 3%, and the interest rates and terms vary based on the lender and the borrower's credit score. Conventional loans can be used for primary residences, second homes, or investment properties.
- FHA Loans: FHA loans are backed by the Federal Housing Administration and are designed to help homebuyers who may not qualify for conventional loans. These loans typically require a down payment of only 3.5% and have more flexible credit requirements. However, borrowers will be required to pay mortgage insurance premiums, which can increase the overall cost of the loan.
- VA Loans: VA loans are available to active-duty military members, veterans, and their families. These loans are backed by the Department of Veterans Affairs and offer several benefits, including no down payment, no mortgage insurance, and competitive interest rates. However, there are specific eligibility requirements, such as length of service and discharge status, that must be met to qualify for a VA loan.
- USDA Loans: USDA loans are offered by the U.S. Department of Agriculture and are designed to help homebuyers in rural areas. These loans typically require no down payment and have flexible credit requirements. However, borrowers must meet income eligibility requirements and the property being purchased must be located in an eligible rural area.
- Jumbo Loans: Jumbo loans are designed for homebuyers who need to borrow more than the conventional loan limit. These loans typically have higher interest rates and stricter requirements, as they represent a greater risk to the lender.
- Fixed-Rate Loans: Fixed-rate loans are a popular choice for homebuyers who want to lock in a consistent interest rate and monthly payment. These loans typically have terms of 15 or 30 years, and the interest rate remains the same for the life of the loan.
- Adjustable-Rate Loans: Adjustable-rate loans (ARMs) have interest rates that can fluctuate over time, depending on market conditions. These loans typically have lower initial interest rates than fixed-rate loans, but the rate can increase over time, resulting in a higher monthly payment.
Also, THDA (Tennessee Housing Development Agency) loans are another option for homebuyers in Tennessee. THDA loans are designed to help low-to-moderate income individuals and families purchase a home, and they offer several benefits, including:
- Down Payment Assistance: THDA loans offer down payment assistance in the form of a grant, which does not need to be repaid. This can help reduce the amount of money a borrower needs to put down on a home.
- Below-Market Interest Rates: THDA loans offer below-market interest rates, making them a more affordable option for homebuyers who may not qualify for conventional loans.
- Flexible Credit Requirements: THDA loans have flexible credit requirements, which can be beneficial for borrowers who may not have perfect credit.
- Closing Cost Assistance: THDA loans also offer closing cost assistance, which can help reduce the amount of money a borrower needs to pay upfront when purchasing a home.
It's important to note that THDA loans have specific eligibility requirements, such as income limits and purchase price limits. In addition, borrowers are required to attend a homebuyer education course to qualify for a THDA loan.
As a real estate agent who knows the Tennessee real estate market well, I can provide additional guidance on THDA loans and connect you with a qualified lender who can help you explore your options. THDA loans can be an excellent choice for homebuyers who need a little extra help to achieve their dream of homeownership.
There are many things I tell my buyers during our buyers consultation not to do while we are in the process of looking and buying a home. Here is a short list.....
- Don't buy a new car.
- Don't apply for a new credit card.
- Don't go furnish the home before you own it.
- Avoid changing jobs or quitting your current one.
- Don't close any credit accounts or pay anything off, unless the lender suggests you do this for the loan.
- Don't get behind on any payments.
- Don't move money around without a paper trail.
- Don't spend your savings.
Audra Hicks - Your trusted Real Estate Agent for the Nashville, Middle & East TN areas!