Call: 804-784-4364
Current Mortgage Rates: Richmond, VA
4.750% (4.787% APR) 30yrs
4.125% (4.163% APR) 15yrs
as of 12/13/18
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What Mortgage Loan is Right For You?

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Knowing more about different types of mortgages can assist you in finding the right lender, choosing the best type of loan, and planning for different variables and options. Ask your mortgage lender to explain several types of plans, and work together to determine which loan would be best for your current and future needs.

Conventional Mortgages

A conventional mortgage, also known as a fixed rate mortgage, has a fixed APR for the duration of the loan term. However, loan terms are variable. 15- and 30-year conventional loans are the most common, and may affect your down payment, APR, and monthly payment. Either way, a conventional mortgage will have a fixed APR until you choose to refinance or pay off the loan.

FHA Loans

FHA loans can be the easiest type of loan to qualify for because they require a low down payment of 3.5% and allow the purchaser to have a credit score anywhere above 585. Although these are the minimum requirements for starting an FHA loan, having a higher credit score and larger down payment can affect your mortgage term, APR, and monthly payment. Each individual mortgage lender may have different specifications.

Read more about FHA Loans here.

VA Mortgage Loans

VA Loans are specifically for United States veterans, service members, and widowed spouses of deceased service members. To purchase a home with a VA loan, you do not need to provide a down payment or purchase mortgage insurance.

Although costs are generally lower with a VA Loan, they do require a one-time lending fee of 2.15%. This fee is reduced to 1.25% is the buyer provides a down-payment of 10% or more. Another benefit of a VA Loan is that Veteran’s Affairs will re-negotiate on behalf of the loan recipient should they run into financial difficulty.

You can learn more about the qualifications for VA Loans here.

Adjustable rate mortgages

Adjustable rate mortgages come in several different types and are available based on the lender you choose to work with. The variables that affect the APR could be loan term, current market rates, repayment history, cost of the home, and income. Choosing an adjustable rate mortgage is usually for a unique home buying situation, such as a large purchase.

One year ARMs

A one-year Adjustable Rate Mortgage will have a fixed APR for one year, and afterward, have a rate that changes yearly for the remaining life of the loan. This adjustable APR will be based on the loan index, repayment schedule, duration of the loan, and other factors. The benefit of a one year ARM is that the first year will generally have a very low APR. They will also have an adjustable rate cap, which prevents the APR being raised above a certain rate.

5/5 and 5/1 ARM

You may also benefit from a 5/1 ARM (adjustable rate mortgage) loan. A 5/1 ARM will have a fixed low-interest rate for the first 5 years of the loan, and afterward, the interest rate and monthly payment will be variable from year to year based on the loan index, as well as the market and payment history. The benefit of a 5/1 is the low-interest rate if you are likely to pay the loan off within that time.

USDA mortgage loan

Also known as the United States Department of Agriculture (USDA) Rural Development Loan or Rural Housing Loan, a USDA mortgage loan was created to help populated rural areas and to stimulate economic growth. These loans are for designated rural areas. Choosing a USDA loan could allow you to finance 100% of the purchase price.

Refinancing a Mortgage

A mortgage loan is different from other loans in that you are building equity as you pay off the loan. For this reason, both complete and incompletely paid off mortgage loans are available for refinancing with your lender or another. Refinancing a loan can be an excellent financial choice if you are making new investments and wish to use the equity that you already have.

Review the terms of your mortgage to understand this flexibility, and know that it may only be an option with some longer-term mortgages. Learn more about refinancing a mortgage here.


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