Like much of the rest of the country, Oklahoma is in the thick of a hot housing market. It's not uncommon for homes to barely hit the market before they're snatched up. It's also not uncommon for those same homes to be sold quite a bit above the asking price.
If you're considering or are ready to get into the housing market, you need to prepare for when you find the home of your dreams. That means you need your mortgage loan research done and ready so you know what your price range is and what you can afford.
There are many types of home loans in Oklahoma for homebuyers to consider. You already know it's important to get the best loan for the least amount of money out of your pocket.
Read on for the different types of home loans you could get when you make your home purchase.
One of the first things most potential home buyers consider is the interest rate they might secure when getting their mortgage. Interest is the amount of money you're charged by the bank because they have loaned you money.
Interest goes beyond the actual number though. You also want to know how they will charge the interest on your loan. You could get a fixed-rate mortgage or an adjustable-rate mortgage.
A fixed-rate mortgage means you pay the same rate throughout the life of the loan. Your payment remains the same for the life of the loan, assuming taxes or insurance rates don't change.
While your payment remains the same over the course of the loan, the amount that goes to interest and principal varies over time. This is called the amortization schedule and it will shift over the life of the loan. The newer the mortgage, the more interest you pay. Over time, more of your payments go to the principal.
The amount of interest you pay will depend on how long the mortgage is written for. Mortgages are commonly written for 15 years, 20 years, and 30 years. The longer you spread out the repayment, the lower your payment. At the same time, you'll pay more in interest because you've borrowed for longer.
An adjustable-rate mortgage means the interest rate is variable and will change over the life of the loan. How often it changes will depend on the terms of the loan.
Most adjustable-rate mortgages will remain locked for a set period of time. Then the loan will do a reset with a new interest rate based on current market rates.
Once you understand how interest impacts a mortgage, you can consider the many types of loans you might choose from when you apply for your mortgage.
The first thing to know about a home mortgage is whether the loan is a conventional loan or a government-backed loan.
In a conventional mortgage, you apply with a lender who will subsequently review your credit worthiness. Generally, the loan request will be approved if the lender believes you meet their underwriting requirements.
In a government-backed loan, you still apply to a private lender, but the government through one of their many loan options backs the loan and offers the lender a guarantee to pay a percentage if you were to default on the loan. There are a variety of different government back loans. Let's take a closer look.
A conventional home loan is between the lender and the homebuyer without any other institution involved. While it can be tougher to qualify for a conventional mortgage, you have more options if you do qualify.
Most who take out a conventional mortgage have stronger credit. To avoid paying private mortgage insurance or PMI, you'll want to have a 20% down payment. If you don't have a 20% down payment, then the lender will add in PMI.
The PMI is a type of insurance that protects the lender's interest in giving you the loan with a smaller down payment.
An FHA mortgage loan is a mortgage that is backed by the US Department of Housing and Urban Development. HUD doesn't actually give you the loan.
Instead, the loan is issued by a private lender but HUD backs the FHA loan.
FHA loans are desirable because often you can qualify for them with low closing costs and less particular credit qualifying.
Another big draw for an FHA loan is that you may be able to buy a home with a lower than average down payment requirement.
Like an FHA loan, a VA loan is a government-backed loan through the US Department of Veterans Affairs. If you're a veteran, a reservist, or a national guard member, you might qualify for a VA loan.
Again, the VA doesn't issue the loan. Instead, they guarantee a loan issued by a private lender.
If you’re eligible for a VA loan, the benefits include low down payment rates, competitive interest rates, and no mortgage insurance.
The USDA loan program is another government backed loan program through the US Department of Agriculture. Its original intent was to get homebuyers to buy in more rural areas.
Many people assume their desired home won't qualify for a USDA loan because of the association with rural areas. Actually, more locations qualify than you may expect.
The USDA provides a qualifier map that can help you determine if the home you’re interested in might qualify for the USDA Loan program.
Another lesser-known loan option is for Native Americans. HUD Section 184K loan for Native Americans offers a government-backed mortgage for Native Americans.
This loan is desirable because you can qualify with a very low down payment. Some of their loans require paying PMI but in lower amounts than you might pay with a conventional mortgage.
Each year Fannie Mae or Freddie Mac releases guidelines for loan amounts that can be backed by a government agency. If you live in a housing market with very high home prices, often the prices exceed these limits. It means you need to seek a jumbo loan.
These nonconforming loans will vary based on lender and location.
If you're looking for home loans in Oklahoma, you'll want to consider your own financial picture to help you decide which type of loan is the best loan for you.
At Triad Bank, we can help you with your mortgage needs. Let us help you look at your financial situation and find the best mortgage to meet your needs. Contact us today so we can get started helping you.