Nervous a little bit? Buying the first home is exciting but the loan options come with tension and nervousness. Don’t worry. You are not alone. More than 36 percent of people get confused about the loan option available for them. As a first time home buyer, you should know about the home loan fundamentals that increase confidence in your mind.

Interest is no doubt a crucial factor in deciding the best loan option available for you. As per the First-time home buyer Richmond Hill, some loan offers fixed interest rate, while the others doesn’t change in the full loan term. Discover different types of loans available for you and choose the best one from there.

Conventional loans

Conventional loan is a 30 year loan where the interest rate is fixed. Any fluctuation in the real estate marker will not affect that interest rate. There are two different types of conventional loans such as secured and unsecured. The secured loan will come with lower interest rate and this is backed up by another property. The unsecured loan is based on the financial and credit history of the buyer.

To get the best interest rate on conventional home loan, the buyer needs to save at least 20 percent down payment. Some financial institutions are offer  mortgages with 3 percent down payment which is no doubt attractive for the first time buyers. Conventional home loan allows more flexibility but make sure it ask the potential lenders about other options and impact that the down payment will have on the interest rate.

FHA Loans

In a recent study, it is seen that 80 percent of FHA loans are taken by the first-time home buyers. This loan is offered by the Federal Housing Administration and insured by the government This loan is ideal for those who have low credit scores and modest income. In conventional loan, First-time home buyer Richmond Hill need down payment of 20 percent of the purchase price and the FHA loan takes 3.5 percent of it.

Most of the FHA loan comes with 15-30 years terms along with fixed rate. Here the buyers need to pay upfront and annual insurance premiums.

USDA loans

The USDA loan is the ideal for them, who want to buy home in any rural part of the country. This loan is backed up by the Agriculture department. Just like the FHA loan, the biggest benefit of this loan is government backing. To avail this loan, no down payment is needed and the interest rate is also comparatively low than the others. It comes with cheapest mortgage insurance and specially for the low income buyers. You must know what is the USDA loan criteria and requirements to be eligible for the loan.

But with this loan, you can only buy home at certain parts of the country. That’s why the USDA loan is only for the less populated areas. The USDA’s eligibility map tool defines the areas where this loan is available. Be sure, that with USDA loan, you are not able to buy your home in any big metro area.

VA loans

VA loan is the best option for themselves who are a military member or has veteran in the family. To avail the VA loan, it needs zero down payment and the buyer doesn’t have to pay any mortgage insurance. Lower credit score is also eligible to get this loan. The most interesting part of this loan is that, it doesn’t have cons. If you can qualify one of those above-mentioned criteria, you can apply for this loan.

Fannie Mae Home Ready

This home loan program is not only for the first time home buyers, as it allows the down payment as little as 3 percent. It doesn’t have any upfront mortgage insurance premium that FHA requires. This loan program is designed for them who have moderate monthly income.

Adjustable Rate Mortgage (ARM)

This loan is ideal for the people who have low credit scores. It offers comparatively lower interest rate than the fixed rate mortgage. Adjustable rate mortgage means if the interest rate rises, the monthly payment will also raise. If the rates fall, then you can also notice a decrease in your payment. Now you know different types of loan option available as the first time home buyer. Choose wisely the best option for you and enjoy its lifetime benefits. First-time home buyer Richmond Hill is always there by your side.