Mortgage Loans in Salt Lake CityFinally deciding that it’s time to buy that home you’ve always dreamt of can be thrilling. Purchasing a home is a huge investment and knowing what to expect can help you avoid falling into common pitfalls first-time buyers find themselves in. With a variety of mortgage products in the market, how do you decide which home loan to choose? 

Here are some guidelines that will make the process of choosing home loans in Salt Lake City much easier.

Types of Mortgages

There are mainly two types of mortgages: the government-insured loans and conventional loans. Government-backed loans can come in three forms: USDA loans which are backed by the Department of Agriculture, VA loans backed by the Department of Veterans Affairs, and FHA loans which are insured the Federal housing Administration.

Conventional loans are backed by a banking institution or a private company. These types of loans are available for various terms such as 15, 20 and up to 30 years. Furthermore, they require at least 5 percent down payment which can sometimes go up to 20 percent depending on your credit history and the type of lender you choose.

Government insured loans only require you to have a solid credit and a stable source of income. For example, FHA loans only require a 3.5 percent down payment and a credit score of at least 580.

Type of Interest Rate

There is a fixed and adjustable rate. Fixed rates never change and are perfect for people who are looking to repay their loan within 15-30 years and have a stable income. Nonetheless, it’s important to note that other fees such as homeowner’s association dues and annual property taxes may result in fluctuation.

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Adjustable rates are those that reset after a certain time. At the start, they may be lower than fixed rate loans. However, after the initial terms end, your monthly payments increase annually based on a margin and on an index.

Size of the Loan

Classified as either conforming or non-conforming, the size of the loan is another issue to consider. Conforming loans are limited to $417,000 for single-family homes. For high-cost areas, the price may go up to $625,000. Non-conforming loans are riskier and come with a high down payment requirement.

Getting a home loan largely depends on your credit history, your income and future financial goals. Before applying for any loan, check to see if your credit score allows you to borrow. And if not, try to boost it. Talk to a mortgage broker to get the best rates.