Loan Options Defined

Dated: 08/15/2016

Views: 363

When you think about your dream home, the butterflies and angel whispers often supersede reality. If you've found that lovely home, chances are you're likely going to need financing; sorry to burst your bubble. But, it's ok, you'll learn just about anything if you have to get this beauty. We're glad you feel that way, because today we're gonna give you a gentle introduction to loan options. 

It's important to know about loan options. Knowledge and best choices will determine several things, like how much you'll need to borrow, what's needed up front, and what the cost is over time.

A loan option is almost always made up of three key things:

  1. Loan Term

  2. Interest Rate Type

  3. Loan Type

  • Loan Term-is generally 30 year, 15 year, or other span of time you will borrow money, and repay your loan. Your choice of Loan Term will affect monthly principal and interest payment amounts, the rate of interest you will pay, and how much interest you will pay over the life of the loan. In general, the longer your loan term, the more interest you will pay. Loans with shorter terms usually have lower interest costs but higher monthly payments than loans with longer terms. But a lot depends on the specifics – exactly how much lower the interest costs and how much higher the monthly payments could be depends on which loan terms you're looking at as well as the interest rate. An example of Loan Terms is illustrated below:

Image title

  • Interest Rate Type- Loan interest rate types are 1). Fixed & 2). Adjustable Rate. Your choice on rate types will affect whether your payment stays the same, or will vary, and also the amount of interest you will pay over the life of the loan. An example of Interest Rate Types, are below:

Image title

  • Loan Types-are Conventional, FHA or other special programs.  Mortgage loans are organized into categories based on the size of the loan and whether they are part of a government program. Loan type choices will affect how much you need for a down payment, the total cost of your loan including interest and mortgage insurance, and how much house you can afford. Each loan type is designed for different situations. Sometimes, only one loan type will fit your situation. If multiple options fit your situation, try out scenarios and ask lenders to provide several quotes so you can see which type offers the best deal overall.

  • Conventional

    • Majority of loans

    • Typically cost less than FHA loans but can be harder to get

  • FHA

    • Low down payment

    • Available to those with lower credit scores

  • Special programs:

    • VA: For veterans, servicemembers, or surviving spouses

    • USDA: For low- to middle-income borrowers in rural areas

    • Local: For low- to middle-income borrowers, first-time homebuyers, or public service employees

There. It's that simple; well, kind of. There is actually more to the loan process of course, but this will get you started, but we're not going to leave you hanging! Call us and let us explain the rest in easy to understand terms. We're in the office at(423) 433-6517, and as always welcome you to come by for a visit to our office inside of Keller Williams Realty at 1033 Hamilton Place in Johnson City. Be empowered!

Blog author image

Wes Shields

Wes Shields, Team Owner and Listing Agent for The Shields Team at Keller Williams Realty of Johnson City Tennessee, has a long and very impressive list of accomplishments in his 10+ years in the real ....

Want to Advertise on this Site?

Latest Blog Posts

Is That Really A Bedroom

It seems kind of silly to have to ask the question, "is that a bedroom?" when you see what obviously looks like one. Our friend, you might just be surprised that what you see might NOT be a bedroom

Read More

Avoiding The ICK

Maybe you've seen The Property Brothers on HGTV. Actually, we should say we know you've seen. Drew and Jonathan Scott have one the hearts of millions of viewers in the HGTV television series, The

Read More

What Happen To Your Credit Score When You Buy A Home

You've become obsessed with your credit score, guarding it carefully, and keeping a close eye on it to have everything in order when you apply for a home loan. That score will will not only affect

Read More

Reasons To Buy A Home At The Holidays

It seems home buying is the last thing on our minds at this time of year, and especially this year, being an election year, and of course we're officially full speed into Thanksgiving and Christmas

Read More