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Pittsburgh Pennsylvania Home Buyer FAQs...
How Do I Pick The Right Loan Program For Me?
Today’s home buyers have almost an unlimited number of financing options to choose from. If you’re wondering which loan program is right for you, you’re not alone! The right loan for you depends on your individual financial situation, your risk preferences, and how long you plan to own the home. Take a few minutes to answer the following questions:
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Realistically, what do you expect your income to do in the next five years?
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Stay the same or possibly decrease?
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Will It Increase?
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How Long Do You Plan To Live In This House?
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Five years or longer?
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Less than 5 years?
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Uncertain?
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Please Select The Following Statement That Most Closely Fits Your Financial Attitudes:
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I am willing to pay a little more for a steady, predictable monthly payment.
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I am willing to risk having my payments change periodically in return for a lower interest rate over time.
Roughly, How Much Money Have You Saved For Your Initial Investment? (down payment, closing costs, etc…)
- Less than 10% of the anticipated purchase price.
- 10%-20% of the anticipated purchase price.
- More than 20% of the anticipated purchase price.
Which Loan Program Is Right For You?
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If you answered mostly “A” to questions 1-3, you would most likely prefer a fixed loan rate.
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If you answered mostly “B” to questions 1-3, you may want to consider an adjustable rate mortgage (ARM).
On question #4, if you chose:
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“A”, there are many different loan programs that allow little to no money down, including FHA, VA, and Down Payment Assistance Programs. These programs will allow you to obtain a gift for the down payment and closing costs.
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“B”, you may want to consider a no PMI (Private Mortgage Insurance) loan. Some are available with as little a 5% down, plus closing costs.
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“C”, a conventional loan will probably be the least expensive option for you.
Home Loans At A Glance
(Type) |
Definition
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Advantages
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Disadvantages
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Comments
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Fixed Rate
(Conventional)
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Loans where interest and payments are fixed over the life of the loan. |
Rate and payments never change, regardless of inflation. |
Slow equity build-up in the early years; higher initial rate than an ARM Program. |
The most popular program: A good choice when rates are low, or when expected to jump. |
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Adjustable Rate Mortgages
(ARM)
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Loans with interest rates that are subject to change on a periodic basis.
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Low initial interest rate; payments may decrease over time. |
Payments may increase over time; may be risky if interest rates rise significantly. |
Popular with first time buyers and buyers who plan to move or refinance within 3-5 years. |
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FHA Loans
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Loans insured by the Federal Housing Administration. |
Low down payment - (100% may be a gift); more flexible underwriting guidelines than conventional loans. |
Limits on the amount of the loan; equity is built slowly; sellers may object to FHA financing due to strict home requirements. |
Popular with first time buyers who cannot afford the down payment on their own. |
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VA Loans
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Loans guaranteed by the Veteran’s Administration for eligible Veterans. |
No down payment required; closing costs may be a gift; flexible underwriting guidelines. |
Higher closing costs than conventional loans; equity is built slowly; sellers may object to VA financing. |
Only Veterans and those in active military service, or national guard may participate. |
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No-PMI Loans
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Conventional loans available with as little as 5% down payment and no private mortgage insurance. |
Monthly payment is almost identical to loans with PMI; additional interest may be tax deductible. |
Interest rate is typically increased to offset lender risk. |
A good choice for those who don’t plan to own the home long enough to achieve 20% equity or want to avoid paying PMI |
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First Time Buyer Programs
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Loans geared towards first time home buyers. |
Lower down payment; Easier to qualify; Lower rates may be available |
May be subject to income and property limitations; education courses may be required to qualify for the loan. |
Sometimes a good choice for unique situations. May have certain limitations and penalties if you sell too soon |
There is no substitute to meeting with a qualified real estate agent and mortgage professional to discuss the vast array of financing options that are available to you today. We specialize in helping you obtain a new home with the least amount of money possible out of your pocket. So be sure to give me a call, or visit my FREE Quick & Easy Mortgage Qualification Page, and we'll be happy to discuss what options are available to you.
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