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Which Loan Program is Right For You?

Jul 03, 2019 - Posted by: Rocky Mountain Credit Union

You don’t have to be a bazillionaire in order to purchase a home. There are plenty of loan programs out there that can make your home-buying goals attainable and affordable. The only question is: which one is right for you? That’s what we can help with. Check out the loan-program rundown below to kickstart your journey to a new home.  


A conventional loan is any loan that’s not secured or offered by a government entity, but is instead offered by a private lender. If you have great credit and aren’t put off by the potential of a slightly higher interest rate, or your income and circumstances disqualify you from a federal program, a conventional mortgage can be an easy option.  


The Federal Housing Administration insures loans through qualified lenders that are geared toward borrowers who have lower or moderate incomes. They are often available with lower minimum down payments, and borrowers don’t need to have stellar credit scores to qualify. You’ll love this type of loan program if you’re working on building up your credit. Plus, they offer loans to make your home more energy efficient, a big cost saver during cold Montana winters.  


For current military members, veterans and surviving spouses, VA home loansmake a great option. Private lenders issue these loans, and the VA guarantees them. That means that the bank or credit union issuing the loan can often offer more favorable terms. This VA benefit is a great choice if you’re looking to settle down after a term of service.  


The US Department of Agriculture guarantees loans for qualifying rural homebuyers. With only seven people per square mile in the state of Montana (making us the third lowest density per square mile in the nation after Alaska and Wyoming), it’s a pretty easy bet that many residents qualify as rural homebuyers. This can help moderate- and low-income purchasers who need a helping hand to make a home in the countryside. This loan can help you out if you’re purchasing a single-family home in a rural area and it will be your primary residence.


An ARM loan gives you a hand up on home buying. ARM stands for Adjustable Rate Mortgage, and it can make all the difference. That adjustable rate means you can save more early in the term of your loan with a lower monthly payment, letting you put the difference in a high-yield account to help you out down the road. The one thing to keep in mind is that a variable rate can increase as it “varies” later on. This is a great option if you’re only planning on staying in the house for a few years, since you can use that lower starting rate to your benefit.


Balloon mortgages are ones that you typically pay off in one lump sum, though they’ll sometimes include terms that involve interest-only payments. That means that you can have significantly lower monthly payments with a lump-sum repayment of the principal at maturity. They’re often used by construction companies that plan to sell quickly once they’ve finished building. Consumers who plan to sell in the short term can take advantage of the same idea.

Buying a home doesn’t have to be mystifying. Our mortgage specialists at RMCU can answer any questions you may have as you begin the house hunt!


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