With so many mortgage loans for Utah homebuyers to choose from, it can be challenging to decide which is best for you. These options may be overwhelming and may stop buyers from starting the search for a new home. While these options were created to entice more homebuyers, it has unfortunately done the opposite.
When buying a home, it is important to understand the different mortgage options. Each loan has pros and cons that may make them more appealing to diverse buyers. It is also important to understand which of the several loans available will fit each homebuyer’s budget. Premier Utah Real Estate has many experts who understand the mortgage loans for Utah homebuyers and which loan might fit your lifestyle best.
Fixed-Rate Mortgage
A fixed-rate mortgage is a loan with a fixed interest rate throughout the loan term. With fixed-rate mortgages, Utah homebuyers won’t see changes in their interest rate or principal payment. Their principal payment and interest will stay the same each month throughout their 15- or 30-year loan. With a fixed-rate mortgage, homebuyers’ loans won’t be impacted by fluctuations in the market. Because of their reliability, fixed-rate mortgages are the most common mortgage loans for Utah homebuyers.
The most significant benefit associated with a fixed-rate mortgage is its consistent monthly payments. Utah homebuyers don’t have to worry that their mortgage payment won’t fit within their monthly budget. Additionally, the loan will be paid off in full at the end of the loan term.
However, a fixed-rate mortgage may require a larger down payment than some homebuyers can pay. Because you are guaranteed the locked-in interest rate, you may be required to pay more to receive it. If you aren’t prepared for that larger down payment, a fixed-rate mortgage may not appeal to you.
Adjustable-Rate Mortgage (ARM)
An Adjustable-Rate Mortgage (ARM) is a home loan with an interest rate that varies based on the market. These loans typically start with a lower interest rate than you’ll receive with a fixed-rate mortgage. However, the interest rate isn’t locked in and may fluctuate throughout the loan’s term. If they seek a lower mortgage rate, an adjustable-rate mortgage is a great mortgage loan for Utah homebuyers.
The greatest benefit associated with an adjustable-rate mortgage is the lower initial interest rate. It is an excellent option if you seek low monthly payments throughout the loan’s fixed period. These lower payments near the start of the loan may help homebuyers purchase a more expensive home.
However, there is no guarantee that their rate will stay low throughout the loan. Because the loan is subject to market fluctuations, the rate may increase, making monthly principal and interest payments greater than a homebuyer was prepared for or expecting.
Conventional Loans
A conventional loan meets the requirements for Fannie Mae or Freddie Mac. Fannie Mae and Freddie Mac purchase mortgage loans from lenders to sell to investors. Because there are several different guidelines under the conventional loan umbrella, there isn’t a traditional set of requirements for homebuyers. While there are no conventional requirements, these loans may be stricter than a government-backed loan.
When considering a conventional loan, many homebuyers may be enticed by the variety of options available. They may be able to borrow more money than with other mortgage loans. Conventional conforming loans may allow buyers to purchase properties up to $726,200 in many counties. However, this may go up to $1,089,300 in higher-cost counties.
As mentioned, these loans may be stricter than a government-backed loan and may require more of homebuyers. These loans require large down payments and private mortgage insurance if you cannot put down at least 20% of the mortgage. These loans are also not a feasible option for anyone with a credit score lower than 620. Many conventional loans also require a debt-to-income ratio of 50% or less.
Special Programs
VA Loan
VA loans are mortgage loans for Utah homebuyers who are qualifying veterans, current military members, reservists, and surviving spouses and can be used to purchase a new property or refinance an existing mortgage. Many benefits are associated with these loans, including no down payment required or mortgage insurance, lower interest rates and closing costs, and more accessible qualifications. However, VA loans limit the kind of property buyers can purchase and may be less flexible than other loan options.
FHA Loan
FHA loans are mortgage loans insured by the Federal Housing Administration, available for individuals with debt, lower credit scores, or who’ve experienced bankruptcy. These loans often require lower down payments and are much more flexible regarding a buyer’s credit history than other options. However, these loans do require mortgage insurance premiums, regardless of down payment. They also have lower loan maximums. Currently, the FHA loan limit is $472,030.
USDA Loan
USDA loans are mortgage loans available to U.S. citizens or permanent residents looking to purchase property that will serve as their primary residence in rural areas. These loans don’t require a down payment and have flexible credit and qualifying guidelines. However, these loans have geographic restrictions and income limits and require mortgage insurance.
Choosing a Mortgage Loan With Premier Utah
Knowing the pros and cons of these mortgage loans for Utah homebuyers will hopefully give buyers peace of mind. If you are considering purchasing a home in Utah, it is crucial that you have an agent who can help you choose your loan. At Premier Utah Real Estate, our experts understand the unique value of the mortgage loans for Utah homebuyers. They can help you select a loan that suits your needs. If you require our mortgage services and want to know what kind of loan you may pre-qualify for, contact our professional at Premier Utah Real Estate.
