Whether you’re a first-time homebuyer or have owned a home — or purchasing or refinancing –there’s a loan program (or two) for you. No doubt, there’s one that will best suit your needs. This article will show you California’s various types of home loan programs.
First, let’s start with the basics. Most home loans need a down payment of at least 3% of the purchase price. Depending on the loan type and your credit score, the amount of the down payment may be higher. The lender will also require that you have a certain amount of cash reserves, which is money in the bank available to cover any unexpected costs.
Conventional Loan
A conventional loan is a loan that is not insured or guaranteed by any government agency. These loans require a higher credit score and a larger down payment than other loan options; however, they typically offer better interest rates and lower closing costs.
FHA Loan
FHA loans are government-backed loans available to borrowers with lower credit scores(minimum credit score of 580). These loans require as little as 3.5% down and allow for a higher debt-to-income ratio than conventional loans. Mortgage insurance (MI) is required with an FHA loan, and the amount depends on the down payment percentage.
VA Loan
VA loans are available to veterans and military members and don’t need a down payment. VA loans require a funding fee, which is typically 2.15% of the loan amount.
USDA Loan
USDA loans are available to buyers in rural areas of the state. These loans offer 100% financing and don’t require a down payment. The main criterion for USDA loans is that the buyer’s income must not exceed the maximum income limit set for the area.
Jumbo Loan
Jumbo loans are for borrowers who want to purchase a home higher than the loan limit for their area. Jumbo loans need a larger down payment, typically 20%, and may have higher interest rates than other loan types.
Fixed-Rate Mortgage
A fixed-rate mortgage is a loan whose interest rate remains the same throughout the loan term. This loan is a popular choice for California homebuyers because it provides stability and predictability in monthly payments.
Adjustable-Rate Mortgage
An adjustable-rate mortgage (ARM) is a loan where the interest rate can change periodically, usually in response to changes in the market. ARMs typically have lower initial interest rates than fixed-rate mortgages.
Want to learn more about the loans that are available to you? Schedule an appointment with one of our brokers today!
