Home Buyer's Guide

Finding the Right Loan

After determining your budget, it’s time to work with your First Choice Loan Services Loan Originator to find the loan suited for you. There are many different types of mortgages available, and First Choice Loan Services is here to help you select the one that matches your bottom line and lifestyle! There are several key considerations when choosing a loan:

  • Length of time you plan on staying in your home
  • Deciding between a fixed-rate and adjustable-rate mortgage
  • Your available funds for a down payment
  • Eligibility for special options such as a VA or USDA loan

Check out the different loan types available to you below:

Fixed-Rate Mortgages

With fixed rate mortgages, your interest rate and monthly principal and interest remain fixed for the entirety of the loan. This option is among the most popular for loan applicants because, unlike adjustable-rate mortgages, it protects homeowners from future monthly payment increases. However, if interest rates go down, your fixed-rate will remain the same unless you choose to refinance.

A fixed-rate mortgage makes sense if you’re planning to purchase a home for 7 years or more. You gain the stability in knowing exactly what you’ll pay towards principal and interest every month.

Adjustable-Rate Mortgages

This type of mortgage means that your monthly payment can change after a certain period of time. Typically, adjustable-rate mortgages have a period of fixed rates at the beginning of the loan term that tend to be lower than fixed-rate mortgages, meaning a lower starting monthly payment. After this period of time (generally 3, 5, 7 or 10 years), your monthly payment rate can go up or down depending on the financial index with which your loan is associated.

An adjustable-rate mortgage features two types of caps: adjustment caps and lifetime caps. With adjustment caps, the change in your monthly payment rate is limited during adjustment periods. Therefore, it can only go up or down a certain amount. Lifetime caps establish a maximum and minimum interest rate over the entire life of the loan. In this instance, you can be vulnerable to a significant increase (as allowed by the cap) during each adjustment period. If you should pursue an adjustable-rate mortgage, be sure to talk through the rate caps with your First Choice Loan Services Loan Originator.

Conventional

Conventional mortgages are loans that are not guaranteed or insured by any government agency, such as the Federal Housing Administration or the Department of Veterans Affairs. These loans adhere to Fannie Mae or Freddie Mac guidelines and can be conforming or non-conforming. Typically, they have fixed terms and rates.

FHA

FHA loans are mortgages administered by the US Department of Housing and Urban Development and insured by the Federal Housing Administration (FHA). The insurance from the FHA protects the lender if a borrower defaults on the FHA loan. With this protection, lenders are able to provide loan options commonly not offered through conventional financing. Because of their low down payment requirements, FHA mortgages are often well suited for first-time home buyers.

VA

VA mortgages are loans guaranteed by the Department of Veterans Affairs (VA) and made through approved lenders – like First Choice Loan Services. The VA insures these loans, thereby protecting the lenders if borrowers default on this type of mortgage. Eligible borrowers include Veterans, active duty military personnel, and, in some cases, their spouses. Often requiring no down payment, this is an excellent choice for eligible borrowers purchasing their primary residence.

USDA

Guaranteed through the U.S. Department of Agriculture, USDA loans are government-insured home loans that allow borrowers to purchase homes in designated ‘rural’ areas with no money down. The ‘rural’ regions outlined by the USDA vary greatly and can frequently include suburban areas neighboring major metropolitan cities. Offering 100% financing with fixed rates, USDA loans (also known as the USDA Rural Development Guaranteed Housing Loan or Section 502 Loan) provide the opportunity for the closing costs to be paid by the seller or financed into the loan amount.

Jumbo

Jumbo loans are non-conforming loans with amounts that exceed the limits set by the Federal National Mortgage Association (FNMA, aka Fannie Mae) or Federal Home Loan Mortgage Corporation (FHLMC, aka Freddie Mac). Available with fixed and adjustable rate options, Jumbo loan limits vary depending on where the borrower lives. While interest rates for Jumbo loans typically can be higher, First Choice Loan Services works to provide our borrowers the most competitive rates available.

Reverse Mortgages

Designed to assist senior citizens living on limited incomes, Reverse Mortgages enable homeowners who are at least 62 years of age to remain in their home. Instead of making monthly mortgage payments, homeowners actually receive payments from the lender secured by the home’s equity. As long as homeowners participating in a Reverse Mortgage continue to live in the home as their principal residence or do not fail to meet the obligations of the mortgage, they do not have to repay the amount.

Renovation Mortgages

Renovation Mortgages are loans for properties that might need a little attention and improvements before becoming homes of the home buyers’ or homeowners’ dreams. Offering both purchasing and refinancing options, renovation mortgages include the costs of renovation with the loan amount and allow the total to be financed up to 30 years at a fixed rate. Depending on the situations and plans, there are several options available for borrowers to consider.