Loan Programs

Loan Programs

You’ll need to evaluate your options to decide which type of mortgage loan would best suit your needs. A few things to keep in mind include:

  • Conventional vs. government-backed. There are two main types of mortgage loans. The first is a conventional mortgage, which means it’s provided by a private bank, credit union or online lender. These loans tend to have fairly strict eligibility requirements and higher down payments.
  • If your credit isn’t in great shape and/or you haven’t saved up much for a down payment, you may still be able to buy a home through a government-backed mortgage such as an FHA loan or VA loan. These loans are still borrowed through individual lenders, but the funds are insured by the federal government. This makes these loans much less risky to the banks providing them, allowing you to secure more flexible terms.
  • Fixed vs. variable interest rate. Another big consideration is choosing between an interest rate that’s fixed for the entire term of your loan or one that can vary. Fixed-rate loans are generally a safe bet, as you know exactly how much your mortgage payment will be each month. Variable rates tend to be less expensive in the first few years of the loans. However, the rate will reset one or multiple times throughout the loan term according to the current market. That means your interest rate could increase in the future, causing your mortgage payments to become unaffordable.
  • Shorter vs. longer term. Finally, consider how the length of your loan will impact the cost. On one hand, a shorter loan of 15 or 20 years will allow you to pay off your loan faster and save money on interest charges. However, that also means the monthly payments will be much higher, stifling some of your cash flow.

On the other hand, you could extend the loan term out to 30 years or longer. That would help make the monthly payments more affordable and even allow you to borrow more. But by increasing the number of years you spend paying back the loan, you also increase the amount of interest paid over time.