2018 Home Loan Options

Shopping for the right home? This guide can help you shop for the right mortgage, too. 

Plenty of people spend time daydreaming on Zillow, Trulia, Redfin, etc. But very few spend time daydreaming about the type of financing they'll get for their dream home. Oddly enough, most of us just aren't excited about mortgages! A lot of the lack of enthusiasm comes from fear of the unknown. We're not quite sure what we're getting ourselves into when we finance a home. What if we understood it better? Could we get excited about not just the perfect home, but also the perfect home loan? Let's try it! Here's a quick and easy look at some of the most common types of home loans in 2018. 

Types of mortgage rates. 

  • Fixed-rate mortgage. If you're not at all sure what kind of financing you want, this is a solid place to start. When you get a fixed-rate mortgage, you're locking in the interest rate you'll pay for the entire life of your loan. Fixed-rate mortgages most commonly come in 30- and 15-year terms. So usually when you choose this type of home loan, you're agreeing to pay off the cost your home plus interest (accruing at that fixed rate we talked about earlier) in either 30 or 15 years. 
  • Adjustable-rate mortgage. Planning to move again in a few years? You can look into an adjustable-rate mortgage (ARM). Your interest rate usually starts lower than a fixed-rate mortgage's, but it can be adjusted during your loan. The most common ARM is a 5/1, which fixes a low interest rate for five years. After that five year period, your rate can be adjusted (usually upward) each year until you pay off your loan. Let's say you plan to buy a starter home and upgrade in fewer than five years. The 5/1 ARM could be right for you.

Loan backers. 

  • Government-backed loans. The Department of Veteran Affairs (VA) has long offered financing to those who have served in our nation's military. They're not the only government agency helping Americans buy, though. The Federal Housing Administration (FHA) offers home loans to first-time buyers with low down payments (just 3.5% if your credit score is over 580). A lesser-known government-backed loan comes from a surprising agency: the USDA. Yes, the US Department of Agriculture offers home financing! These loans are available with 0% down (yep - nothing!) and are intended to help families purchase in rural areas. Don't fear, Ventura County residents! The USDA considers Ojai and Carpinteria sufficiently rural. You can check out a map of eligible areas here
  • Privately offered loans. If you aren't eligible for any government-backed loans or want to stop paying private mortgage insurance (also called PMI - more on that to come in tomorrow's blog) sooner, there are a wide range of private companies offering home financing. 

Clearly, you've got a handful of home loan options - and this is just the start! If you want more information about finding the right home loan, I recommend sitting down with at least three local mortgage brokers. In just a few meetings, you'll get a great idea of your options and - hopefully - will meet a lender with whom you'll enjoy working!