There are several financing options available to make home buying a reality for today’s home buyers. Thinking about the different options can be more than a little overwhelming if you don’t have a trusted local professional to guide you through the process. Expect to spend some time researching the option available based on your particular life circumstance and financial position. Understanding the various options, along with talking to a few local lenders, is the first step toward making the right decision. So here are 5 financing options to help you buy a house in Tulsa Metro area.
1. Conventional Loan
The first of the Tulsa Metro area financing options to consider is the conventional loan. This is the old standby option that most buyers used in the past. There is a giant myth that borrowers actually need a 20% down payment to buy a home using conventional financing, but this is not accurate. You can qualify for a conventional loan with a 5% down payment.
These loans “are mortgages that are not insured or guaranteed by the federal government. They are typically fixed-rate mortgages. Although their stricter requirements for a bigger down payment, higher credit score, [and] lower-income-to-debt ratios . . . make them the most difficult to qualify for, conventional mortgages are usually less costly than guaranteed mortgages.”
Conventional loans also usually take one of two forms: conforming or non-conforming. Conforming loans, as the name suggests, conform to guidelines set forth by entities like Fannie Mae and Freddie Mac, guidelines having to do with things like loan amount limit. Non-conforming loans, on the other hand and obviously, don’t necessarily comply with such guidelines and often come with higher interest rates.
And if these distinctions sound more than a little confusing (and, actually, they are), consult your local real estate agent for some explanation and guidance. (To discover more, call (918) 637-7826.)
2. FHA Loan
A Federal Housing Administration (FHA) loan is, unlike a conventional loan, a government-backed mortgage loan. So owing to this backing, FHA loans typically have lower down payment requirements and are easier to qualify for. This means that an FHA loan is an excellent one of the Tulsa Metro area financing options for first-time home buyers. It’s a great way for them to get into home ownership with a lower credit score and a down payment of as little as 3.5%. There are even down payment assistance options available for certain buyers in Tulsa County and Creek County.
But there’s a catch. With the lower down payment, buyers will usually have to pay for private mortgage insurance (PMI). The cost of this PMI (which is a safety net for lenders when the down payment is lower) is typically rolled into the monthly mortgage payments. What this means is that FHA loans can cost substantially more over the life of the loan.
3. VA Loan
If you are a veteran or active-duty military, there is another attractive financing option to help you buy a house in Tulsa Metro. And this is a VA loan guaranteed by the U.S. Department of Veterans Affairs.
Here’s how it works, according to industry financial pros: “The VA does not make loans itself, but guarantees mortgages made by qualified lenders. These guarantees allow veterans and service people to obtain home loans with favorable terms, usually without a down payment. In most cases, VA loans are easier to qualify for than conventional loans. Lenders generally limit the maximum VA loan to conventional mortgage loan limits.”
4. USDA Loan
A USDA loan is a zero-down home loan meant for low- to moderate-income home buyers. Check the income eligibility to see if you qualify. You might qualify if you have an average salary for your area, and want to buy a home in a rural area. Eligible buyers can finance 100% of the home’s purchase price with a USDA loan. Some areas in Kiefer, Mounds, Bixby, and Sapulpa are eligible for USDA financing.
5. Type of Mortgage Rate
Besides the kind of loan when considering financing options for a Tulsa Metro house, you will also need to consider the type of mortgage rate that best fits your needs. The two main types are fixed-rate and floating- or adjustable-rate and each has its own peculiar benefits and downsides.
With a fixed-rate mortgage, the interest rate stays the same over the entire life of the loan – it never changes. The advantage here is that buyers will know what their payments are always going to be and can budget accordingly. But if you get locked into a fixed rate when rates are high, it may not be such a great thing.
An adjustable-rate mortgage (ARM) starts out with a fairly low-interest rate that increases later on. This type of mortgage rate “is designed to assist first-time buyers or people who expect their incomes to rise . . . Of course, this option can be risky if your income does not grow in step with the increase in interest rate.”
Cut Through the Confusion in Financing Options
Often, in light of all these possibilities cluttered with industry jargon, it takes a real estate professional to make sense of it. And that exactly where I can help. I can help guide you through the process and recommend trusted lenders past clients have had successful experiences with in the Tulsa Metro area.