One of the most difficult aspects of buying a house is the financing - figuring out how much you can afford, finding a good lender and choosing a mortgage.
Real estate agents can help you get through this complex process, but it helps to have a good grounding in the basics before you get started.The following information, mostly from the trade publication Real Estate Today, describes the mortgages generally available and the advantages and special features of each.
Reading this will give you a good idea of what you'll find when you start to look for a mortgage and allow you to do knowledgeable comparison shopping.
Loan type: FHA (Federal Housing Administration) fixed rate
Loan term: 30 year, 25 year, 20 year, 15 year
Assumable: Yes.
Who might benefit: First-time buyers with little cash.
Loan type: FHA adjustable rate mortgage
Loan term: 30 years
Assumable: Yes.
Who might benefit: First-time buyers whose income is likely to go up.
Loan type: VA (Department of Veterans Affairs) fixed rate
Loan term: 30 year and 15 year
Loan Limits: $184,000
Assumable: Yes.
Special features: No down payment. Sellers can pay all closing costs and prepaids.
Who might benefit: Only available to eligible veterans and active military personnel.
Loan type: VA adjustable rate mortgage
Loan term: 30 years
Assumable: Yes
Special features: No down payment, but borrowers must qualify at a rate 1 percentage point over the starting rate.
Who might benefit: Buyers short of cash.
Loan type: Conventional fixed rate
Loan term: 30 year, 25 year (hard to find), 20 year, 15 year and 10 year
Assumable: No.
Who might benefit: Buyers who can put 20 percent down and avoid private mortgage insurance. But private mortgage insurance is still cheaper overall than FHA mortgage insurance.
Loan type: Conventional ARM
Loan term: Most 30 year, occasionally 15 year
Assumable: Yes.
Who might benefit: Buyers whose incomes are rising, buyers who won't be in the house more than three to five years.
Loan type: 7/23 and 5/25 programs
Loan term: 30-year loan with five or seven years of level payments, then convert to an ARM.
Assumable: No.
Who might benefit: buyers who Loan type: Community home buyers program.
Loan term: 30 years
Assumable: No.
Who might benefit: First-time buyers, cash-strapped buyers.