Homeownership and Mortgages: First Things You Should Know

home ownership

What people aspire for in life is often dictated by their background and context, as well as the current time period. This is noticeable in the way those belonging in the Baby Boomer generation often speak about how successful they felt when they purchased their first homes in their early to late 20s.

Generation Y or the millennials, on the other hand, might wait quite some time before they plan to buy a home. They usually settle on renting or living with their parents first while they establish their careers. And when the time comes that they do want to own a house, they have to decide on which of the home loans in Provo, Utah or any other state they can apply for.

Understanding how each housing loan functions is beneficial for all aspiring homeowners. Learning each type leaves you with enough grasp as to what the requirements are, how much you would need to pay, and if you are even viable to apply in the first place.

Adjustable-Rate Mortgage

Also known as the variable rate mortgage, this loan type operates in such a way that interest rates and payments adjust every year depending on the corresponding rate set. For this kind of mortgage, the interest rates are lower compared to those offered by fixed-rate mortgages for the first five or so years.

Fixed-Rate Mortgage

mortgage concept

This is the best option for aspiring homeowners who desire consistency and predictability. Unlike an adjustable-rate mortgage, the required payment for each month will remain the same until the entirety of the mortgage is paid off. Typically, those with good credit scores are the ones who apply for this type of loan because it is more plausible for them to get good rates compared to those with a less than average credit score.

Bridge Loan

The bridge loan is the perfect kind for those wishing to purchase a new home but are still currently paying off another mortgage. Otherwise known as the gap loan, it helps homeowners with refinancing in such a way that the current and new mortgages are fused into one. When the old home is sold, the money earned will be used to pay off the new down payment.

Federal Housing Administration Loan

The FHA loan is attractive to many potential homeowners because the down payment it requires can be less than 20% of the total price of the property they wish to purchase. The 20% rate is what most lenders require their candidates if they wish to apply for a loan.

It should be noted, however, that the FHA has a ceiling height for the price amount that aspiring homeowners can purchase. In most areas, it is up to $420,000. In some higher-cost locations, it can go up to $600,000.

It is important to remember that the type of loan you can apply for is also affected by your other choices, such as the location you wish to live in, the property you want to own, as well as the credit score you have built up in your adulthood.

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