Types of Home loans in LA for first-time buyers

If you live in California, buying your own house could be exciting. However, you might get overwhelmed with the different home loans and mortgage plans available. It is your first time; you get anxious and worried, and you don’t want to fall into the trap of a bad loan. Making yourself aware of the types of home loans in LA makes it easier to choose the most appropriate loan.

To choose the most suitable amortization payment and interest rate, you need to have the right kind of knowledge.   

Conventional loan 

There are two types of conventional loans, Conforming loans, and non-conforming loans. The federal government does not guarantee these loans, and it could be difficult for you to qualify for a conventional loan compared to a government-backed loan.

If you have a strong credit history, you can get a conventional loan. To get the best rate for your loan, having a credit score of 740 will help you a great deal.

Conventional loans give you more control over your mortgage insurance, and you can cancel your private mortgage insurance when your loan balance is below 78%. However, for an FHA loan, the mortgage insurance is till the life of the loan.

Since there are no government-prescribed plans lenders need to follow, you have more options for mortgage plans when it comes to conventional loans. You can choose to have an adjustable mortgage rate and select your term.

Government-insured loans 

VA loans: VA loans are government-backed loans for US military members and their families. There is no down payment required, and you also don’t need to get mortgage insurance. If you cannot qualify for the conventional loan, you can opt for this type of loan. Whether you are a first-time buyer or a repeat buyer, you can take advantage of this loan in the US military.

FHA loans: if you don’t have a strong credit history, you can still apply for the loan. You need to have a FICO score of 580, and a score of 500 also makes you eligible for the loan. FHA loans require you to get mortgage insurance, and you have to pay for the insurance annually for the lifespan of the loan. The first insurance premium you have to pay upfront.

USDA loans: These loans are suitable for low-income borrowers. If you belong to a rural area, you can buy a home in USDA approved area. For very low-income borrowers, it is not necessary to make the down payment.

California Mortgage plan terms 

If you are tired of renting your house and you want to own a home, check out the mortgage plans available in California. There are different mortgage plans with varying terms like 15-years, 20-years, and 30-years. The two common types of mortgage plans in California are as follows. 

30-year fixed mortgage plan  

The 30-year mortgage plan comes with a fixed rate from year to year. Throughout the entire life of the loan, the mortgage rate is fixed. Mortgage rates keep fluctuating with time, and they tend to go up and down. No matter what the interest rate of the mortgage plan is, your plan is not affected.

For a fixed mortgage plan, 30-years is the most common tenure. However, some lenders offer you different terms as well. If you keep the term shorter, such as 15 to 20 years, the fixed mortgage rate would be lower. Therefore, it is good to choose a fixed mortgage plan for the short term.

Adjustable mortgage plan 

An adjustable mortgage plan is affected by the periodic adjustments in the interest rate. As a borrower, you can take advantage of the falling interest rate of the market. However, the mortgage rates are usually going up, and therefore, the adjustable mortgage rates stay generally high.

Which is the best option for you? 

Adjustable mortgage plans are suitable for someone who plans to move quickly. You can avail of the variable mortgage plan and then proceed to another program.

If you want stability, a fixed mortgage plan is the right option for you. This way, you’d have an idea of what the payment of your mortgage plan will be.