Buying a new home is a big decision that needs careful consideration. Most people get home loans to finance their house purchases. According to mortgage broker Romik Yeghnazary, every home loan is different with different criteria, repayment plans, and many more. This is why he advised potential homeowners to find out properly which home loan suits them. Romik Yeghnazary is the founder and CEO of Lending Arena. He has worked in the sector for 17 years and has helped many people secure home loans. His company prides itself on its trustworthy work ethic and has secured millions of dollars in mortgages for its clients.
Types of Home Loans
Conventional Loan
If you have good credit, then you can apply for this loan. However, the US government doesn’t fund this loan, and it is of two types, conforming, and non-conforming. Non-conforming loans are specifically for people who want to buy expensive houses. This mortgage type doesn’t meet the housing regulatory body’s standards. But conforming mortgages are mortgages that follow the rules and regulations of the housing regulatory body. Conforming mortgages have a fund limit, and brokers will not exceed the loan limit for their clients.
Advantages
- People apply for this loan to buy investment homes or purchase their first or second property.
- A down payment of three percent is possible
- You can change the mortgage type to cancel the loan
Disadvantages
- Must have a 620 credit score or more.
- Sometimes, the down payment can be a bit higher.
- Documents are required to show your job, income, and any down payment made.
- A certain percentage is required for debt to income (DTI).
Mortgages Insured by the Government
This is suitable for borrowers with low credit. Note that the United States government doesn’t give citizens home loans. But the government makes it easy for Americans to own a house. For this reason, the government established three departments to support mortgages.
Advantages
- Lend money to borrowers that couldn’t get a conventional mortgage.
- Fewer credit requirements for borrowers.
- No need to make a huge down payment.
- People buying homes for the first time or second time can apply.
- VA loan doesn’t need home finance insurance or a down payment.
Disadvantages
- Borrowers must get mortgage insurance.
- Borrowers can’t cancel FHA home loans premium. However, this can be possible only if they change it to a conventional mortgage.
- Borrowers must occupy the house as part of the agreement.
- Additional documentation is needed.
Jumbo Mortgage
This is suitable for homebuyers that have good credit and are interested in buying expensive properties. Romik Yeghnazary says FHFA doesn’t cover Jumbo mortgages.
Advantages
- Jumbo’s interest is as good as other loans.
- Borrowers can get more Home loans to purchase a costly home.
- Some borrowers can use the opportunity to be homeowners in rich neighborhoods in the United States.
Disadvantages
- A 10% or more down payment is needed to apply for home financing.
- Additionally, a 700 or more credit score requirement must be met.
- A DTI of 45% or less is required
- Evidence to show your total assets.
- Adequate documentation is needed to apply for Jumbo home financing.
Who is it for?
It’s for intending homeowners who want to purchase a building whose purchase price exceeds the current conforming mortgage limit.
Adjustable Rate Mortgage
Suitable for people who don’t plan to occupy the house for long. These sets of people would rather make smaller payments in a short period. In addition, they are okay with spending more money later. However, adjustable home financing isn’t as stable as fixed loans. The reason is that the interest is volatile according to the market situation. Although the amount of interest on some adjustable loans is fixed for some time. However, this will change to an unfixed rate as long as the loan lasts.
Advantages
- Short-time fixed interest.
- Borrowers can save money if the interest reduces after undergoing adjustments.
Disadvantages
- The amount of interest may increase at an unaffordable rate. If such happens, the borrower may default.
- The value of the house might reduce in the long run. This may make it difficult to sell the house or refinance later.
Mortgages with a Fixed Rate
It is good for people who like to make a fixed and predictable monthly repayment plan for mortgages. The amount of interest the borrower will pay on the mortgage is fixed. It means that the repayment plan will not change. And the payment plan can extend to as long as 14 to 30 years.
Advantages
- For the duration of the Home loans, the monthly payment plan, including the interest, doesn’t change.
- This makes it easy to make a monthly housing budget and expenses.
Disadvantages
- There is a need to refinance if the interest rate on the mortgage reduces to help you pay less.
- Interest on the mortgage is significantly more than on other mortgages.
Conclusion
Lastly, Romik Yeghnazary advised those who live in expensive areas in the US to go for a Jumbo mortgage. He also advised those who choose adjustable-rate mortgages to carefully read the terms and conditions before signing them. So whichever Home loans you go for, ensure it goes with your financial need.
