What Mortgage Type Should I Choose?
What are my loan options?
Buying a home can be an exciting yet scary time and knowing your financing options ahead of time can make it easier! While there are many loan options out there the most common ones are Conventional, FHA, VA and NIFA (only available in Nebraska). Some loan types get broken down even further into sub-types but these four will be the primary ones we cover today. When determining the correct fit for you please seek out a local loan officer to help you choose the correct loan program that best suits your needs and available funds to purchase a home.
Conventional mortgages are the most popular loan type that most people think of when they hear the word “mortgage”. Conventional mortgages can range from 10-20% down and even in some cases as low as 5% down. You can also decide between a 15 or 30 year mortgage term. The shorter the life of the loan the less interest you will pay but your payments will be higher compared to a 30 year loan. If you put less than 20% down you will be required to pay PMI (mortgage insurance) until you have 20% equity in the home and then you can ask your lender to remove the PMI.
To start with, FHA stands for "Federal Housing Authority" and is a housing program that has been around since the 1930's. FHA mortgages tend to attract first time homebuyers due to their low required down payment. The down payment can be as low as 3.5%. FHA mortgages can also be helpful to those with lower credit scores compared to a conventional loan. However, lower credit scores can cause you to have a higher interest rate. FHA loans also require mortgage insurance, like conventional loans with less than 20% down do.
VA mortgages are only available to those with veteran status and meet additional criteria or they are also available to some surviving spouses (additional requirements). To see if you meet the criteria for eligibility please visit www.benefits.va.gov. VA loans are commonly known for not having a down payment. The only time you will see a VA loan have a down payment is if the purchase price is higher than the value of the home. VA loans also do not have mortgage insurance, which is normally found on mortgages with less than 20% down. Additionally, VA loans can be reused on future home purchases (additional criteria must be met to regain elegibility) and some closing costs can be covered by the seller. There is a VA funding fee associated with the VA loan. Another benefit of the VA loan is that there is no credit score requirement, instead the entire application process is viewed as a whole.
NIFA stands for “Nebraska Investment Finance Authority”. NIFA is a Nebraska specific mortgage loan type that is aimed at first time homebuyers and according to their website: “Our programs offer competitive interest rates, low or no down payments, closing cost assistance and government or conventional loans.” There are specific requirements such as being a first time homebuyer, a qualified veteran or living in their designated target areas (see website for more details on target areas). Additionally, there are household income limits, purchase price limits, and residency requirements. NIFA also requires all bowers to take a homebuyer education course online during the loan application process. NIFA loans can be classified under conventional or FHA depending on which lending institution you choose to get your mortgage from.
Local Loan Officers Here To Help
The four loan types are not the only available options out there. There are others dedicated to certain professionals and based on your location such as rural homes. Please reach out to a loan officer to receive more in depth descriptions of all options available. If you need assistance in finding a local loan officer, The Jacobsen Group has a list of preferred lenders that are available to help. The list of financial institutions includes but is not limited to: Justin Pinkerton (NMLS #400316) at Arbor Bank, Stephanie Reinhardt (NMLS #623803) at US Bank, Nick Zwiebel (NMLS #623817) at MB Financial and Angie Brookhouser (NMLS #623814) and Kristy Lyons (NMLS #536657) at First National Bank.