What Financing Options are Available When Buying a Home?

When planning to buy a home in the Southwest Twin Cities metro area, it’s important to review your options for financing to assist with the home purchase. Many different mortgage loans are available to home buyers, although which loans you qualify for will depend on your own financial situation. Some popular financing options for home buying are:

Conventional mortgages, which are traditional loans not insured or guaranteed by the government, are provided by various private lenders including banks and credit unions. Most conventional loans require a down payment of anywhere from 3% to 20% of the home’s total purchase price. There are two main types of conventional mortgages: adjustable-rate mortgages (ARMs) and fixed-rate mortgages. With an ARM, the interest rate is fixed for a certain period and then adjusts annually based on market conditions, creating the risk that it can become much higher over time. In a fixed-rate mortgage, the interest rate remains the same for the entire term of the loan, but the initial interest rate may be higher than that of an ARM.

FHA (Federal Housing Administration) loans are popular among first-time homebuyers because they often require lower down payments than conventional loans, often as low as 3.5%. FHA loans are easier to qualify for than conventional loans and are insured by the government, but they may have higher interest rates and require mortgage insurance premiums.
USDA (United States Department of Agriculture) loans are designed to help buyers with lower incomes purchase homes in rural areas. These loans offer 0% down payment options and competitive interest rates but only select home buyers will meet the qualifications.
VA (Veterans Affairs) loans are available to eligible veterans, active-duty service members, and certain members of the National Guard and Reserves; anyone who is not a current or former service member will not qualify. These loans are guaranteed by the Department of Veterans Affairs and typically offer competitive interest rates and require no down payment.

To learn more about the financing options available when buying a home in the Southwest metro of the Twin Cities, get in touch with the Nydahl Group today!