Making the right choice from a home’s loan list can save you a big deal on the security requirements, down payment, fees, and mortgage rates. Factors such as your location or the length of time you will stay put could affect the product you settle for and the loan amount you will get. Here are some of the home buying loan options:

1.      Fixed-rate loan

This is the most popular type of conventional loan. A fixed-rate loan has a single interest rate paid every month for the entire life of the loan, usually 15 or 30 years. This mortgage is appropriate for homeowners who are predictable and are not going anywhere, until the loan is fully paid. The loan requires a down payment and a fixed interest rate for a set period of time. The changes in the market interest rates will not affect the terms of your existing home loan. You will always know what you are expected to pay and when to repay until the debt is cleared. One of the common types of a fixed-rate mortgage is the Jumbo loan.

2.      Adjustable-rate mortgage

Adjustable-rate mortgages give a lower interest rate than you will get with the fixed-rate for a shorter period, let’s say 5 or 10 years, instead of the life of the loan. After the expiry of the initial period, the rates will change corresponding with the current market rates. If the rates go high, the more monthly payments you will be charged, and the lower the interest rates, the lesser the monthly payments you will charged.

This product is ideal for home buyers with lower credit scores. This is because they cannot get favorable monthly payment rates on fixed-rate loans. However, with an adjustable mortgage, the rates can scale down enough to make homeownership more affordable. The loan products are also suitable for people who have the likelihood to move and sell their homes before the mortgage is fully paid.

3.      Federal Housing Administration (FHA)

FHA loans are government-backed. The loans require a down payment as little as 3.5%. The loans are a good fit for homebuyers who have meager savings for down payments. FHA loans are limited loan amounts and fixed-rate products with a payment period of 15 or 30 years.  If your FHA is approved, you must pay a mortgage insurance as security, which is about 1%of the cost of your loan amount. The payment can either be upfront or throughout the loan life.

4.      VA loans

If you have served in the United States military or Veterans Affairs, VA loans are a perfect, government-backed, alternative to conventional loans. If you are eligible for a VA loan, you will get your home financing without mortgage insurance security or down payments.

The VA loans are given to veterans who have served 90 days consecutively in the wartime, 180 days during peacetime, or six years in the reserves. The VA has strict security requirements on what can be purchased using the loan, and the home purchased must be your primary residence, which meets minimum property requirements.

5.      USDA loan

USDA is a government-backed Rural Development loan, which is designed for families in rural areas. The loan does not require down payments, since the government finances 100% price for the eligible homeowners.

The product is available for borrowers in the rural areas. The debt load is designed in such a way that it will not exceed your income by 41%. You will also need to get mortgage insurance security.

6.      Bridge loan

This is also known as a gap loan or repeat financing, which acts as a security when you want to pay for a new home before selling your current residence. The lending financial institution will combine your existing and new mortgage payments to pay off the existing debt and refinancing debt once your home is sold. The loan is ideal for homeowners with a low debt to income ratio, an excellent credit score, and the financial need should not exceed 80% of the value of the two homes cumulatively. This product gives a smooth transitioning from one home to the other without a lot of hassle.