Home Financing Options

While the nature of the news these days is that obtaining financing to buy a home has become a nearly-impossible task, in reality home buyers are presented with a range of financing options that offer them excellent flexibility and affordability. From niche programs like Veterans Administration loans, to the widely-available and exceedingly popular FHA loan, the government is as interested in getting you into a home as ever before. Here’s a look at some of the most popular home financing options:

Government Programs
1. Veterans Administration (VA) loans. Available to members of the armed forces (active and honorably discharged) the VA housing suite includes low interest rates, no downpayment, and lenient credit cut-offs.

2. Federal Housing Administration (FHA) loans. These popular loans currently make up a large percentage of all home financings in the United States, thanks to their flexible credit and debt-to-income ratios, the low downpayment requirement (three percent) and the ability to use gifted funds to fund closing costs.

3. FHA 203(k) loans. These loans, also administrated by the FHA, allow borrowers to purchase homes that need substantial renovation. By rolling the renovation costs into the initial loan, and assessing the value of the rehabilitated property before work is begun, borrowers are able to purchase and restore a residence without having to drum up large cash reserves.

4. Rural Development loans. Funded by the USDA, these rural development loans were traditionally aimed at creating sustainable and quality housing in America’s vast rural spaces. Now, however, with the increase in exurban development around major metropolitan centers, many new housing communities fall under the auspices of USDA loans. The terms on these loans are very generous, with low or no downpayments, generous credit requirements, and closing cost assistance.

Private Lender Options
5. Adjustable Rate Mortgages (ARMs). For home buyers who may not intend on a long stay in their home, adjustable rate mortgages are the perfect way to save substantial amounts of money every month on the mortgage payment. ARM loans are typically set at a fixed rate for an initial period (most typically 5 years), with rates then adjusting to current market rates each year. ARMs typically carry markedly lower initial rates over 30-year fixed rates.

6. Interest-only loans. For those looking to acquire the lowest possible monthly payments, interest-only loans allow buyers to pay only the interest on their loan principle for a set amount of time, dramatically lowering their monthly obligations. In concert with low market interest rates, interest-only loans can offer excellent affordability that may work well in certain financial situations.