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Most Common Home Loans

Buying a home is exciting. Paying for it, however, is another story. Many homeowners choose to take out a mortgage on their home. There are multiple mortgages available, and the right one for you is largely based on your own personal circumstances. A loan officer Las Vegas can help you take a look at the mortgages available to determine which one is the best fit for your financial situation.

Home Loans for First Time Homebuyers

Types of Mortgages

Several types of mortgages are available for prospective homeowners. The most common mortgages are:

  • Fixed rate
  • Adjustable rate
  • Conventional
  • Jumbo
  • Government-backed

Mortgages vary in terms and duration. Most come in 15-year or 30-year terms, but you can also find mortgages that last for longer or shorter periods of time. A loan officer Las Vegas will explain the options to help you determine which structure is right for you.

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Fixed Rate

A fixed rate mortgage is one of the most common and popular types of mortgages available for homeowners. That’s especially true for first-time home buyers and other home buyers who prefer the financial certainty and predictability of knowing how much they’ll be spending in interest payments over the course of the loan’s lifetime. With a fixed rate mortgage, the amount that you pay in interest remains the same over the course of the loan, which is usually either 15 years or 30 years, although some 20-year loans are also available.

The advantage of a fixed-rate loan is that you’ll have predictable payments each month for your interest rates and the loan principal. However, the interest rates may be higher than with other types of loans, and it can take longer to start building equity in your house with a fixed rate mortgage. A fixed rate mortgage is ideal if you plan to stay in your house for 7-10 years.

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Adjustable Rate

Adjustable rate mortgages Las Vegas are another popular type of loan. Adjustable rate loans are also most commonly offered in 15-year or 30-year terms. One of the key differences between a fixed rate mortgage and an adjustable rate mortgage (ARM) is that an adjustable rate mortgage has fluctuating interest rates. The interest rates with an ARM can either rise or fall depending on current market conditions. Although their interest rates generally fluctuate, most ARMs have an interest rate that is fixed for several years before it changes to a variable rate for the remainder of the loan’s duration. While an ARM may provide a low fixed interest rate to start for several years, interest rates are then subject to increases, which puts you at a greater risk of defaulting on your loan.

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A “conventional” loan refers to a loan that is not backed by the government. Conventional loans are grouped into two main categories, which are called conforming or non-conforming. Conforming loans are loans that have limits within the maximum amount established by the Federal Housing Finance Agency. Loans outside of that range are called non-conforming. Conventional loans are appealing to homeowners because many don’t require the full 20 percent down payment that is often a requirement for other types of loans. However, if you pay less than the standard minimum down payment, you are usually required to pay a monthly private mortgage insurance fee to protect the lender in case you default on the loan.

Conventional loans are available for many types of properties, including primary residences, second homes, and investment properties. Conventional Las Vegas mortgage rates are usually lower than with other kinds of mortgages. If the loan is backed by a federal agency such as Fannie Mae or Freddie Mac, your down payment may be as low as three percent. As with other loans, there are some potential drawbacks to consider, too. You must typically have a minimum FICO score of 620, and your debt-to-income ratio must be in the range of 45-50 percent. You may need to provide significant volumes of documentation and paperwork to verify financial conditions such as your assets, income, employment, and down payment. If you have a high credit score and a steady income, you’re a good candidate for this type of loan.

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Jumbo mortgages are loans outside of the normal conforming limit, which means that the price of the home exceeds general federal loan limit amounts. In 2021, the maximum limit for a loan on a single-family home is $548,250. In some areas of the country, however, the maximum loan limit is much higher at $822,375. Jumbo loans are often easy to find and obtain in areas with above-average home prices. However, you may need to provide more documentation in order to show that you qualify for a jumbo loan, which can be tedious and more time-consuming than applying for other types of loans. Keep in mind that you often need a minimum FICO credit score of 700 to apply, although some loans can be obtained with a FICO credit score of 660. Additionally, a down payment of 10 percent to 20 percent is typically required for a jumbo loan.

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Government-backed loans, also called government-insured loans, are backed by one of three federal agencies:

  • Federal Housing Administration (FHA)
  • US Department of Agriculture (USDA)
  • Department of Veterans Affairs (VA)

An FHA loan Las Vegas is an option for homeowners who can’t afford to make the standard down payment or who do not have an optimal credit score. If you can put down 10 percent for your down payment, you can apply with a credit score as low as 500.

A USDA loan is available to help homeowners buy a home if they live in a rural area. Certain income limits must be met to apply for a USDA loan. Additionally, loans are only available in specific regions and parts of the country.

VA loans are an option for US military personnel, including both veterans and active members. VA loans don’t require a down payment or private mortgage insurance payments. They also have a lower closing cost.

For more information on loans and finding the best one, contact us today.

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