How to Choose the Right Mortgage When Buying Your Idaho Home

Understanding mortgage financing options is an important step in the Idaho home-buying process. There are various types of mortgages available, each with its own set of terms and conditions. Understanding the differences between these options can help you make an informed decision and choose the best mortgage for your needs.

Below is a quick overview of the different types of real estate loans available in Idaho. Each of these loan types has advantages and disadvantages, so it is important to consult a mortgage lender to understand which type would work best for your individual lifestyle and budget. Additionally, many lenders offer unique loans tailored to each borrower’s needs that may allow for additional savings.

Adjustable-Rate Mortgages (ARMs):

ARMs have an interest rate that can change over time. They typically have a lower interest rate at the beginning of the loan, but the rate can increase or decrease later on. This means that the borrower's monthly payments can also change.

Balloon Mortgages:

A balloon mortgage has an amortization period that is longer than the loan term, resulting in a large lump sum payment due at the end of the loan. For instance, a loan may be amortized for 20 years but the loan itself has to be paid off within 7 years. This type of loan is ideal for someone who plans to have cash from the sale of assets in the near future or can qualify for a reduced interest rate in a few years.

Conventional Mortgages:

These mortgages are not insured or guaranteed by the government and are offered by private lenders. They typically require a down payment of at least 20% and have stricter credit and income requirements compared to government-backed mortgages.

FHA Loans:

FHA loans are government-backed mortgages that are insured by the Federal Housing Administration. They typically require a down payment of as low as 3.5% and have more flexible credit and income requirements compared to conventional mortgages. However, they also have mortgage insurance premiums that borrowers must pay.

Fixed-Rate Mortgages:

Fixed-rate mortgages have an interest rate that remains constant over the entire loan period. This means that the borrower's monthly payments remain consistent and predictable over time, allowing them to budget accordingly. Additionally, fixed-rate mortgages can be beneficial for borrowers who plan to stay in their home for several years since the interest rate will not fluctuate with market fluctuations.

IHFA Loan:

Idaho Housing loans offer a variety of options for Idaho residents. Idaho homebuyers may be eligible for Idaho Housing's First Loan financing program, which provides lower interest rates, closing cost assistance, and income tax credits. Idaho Housing also offers various down payment assistance programs to assist with the costs associated with purchasing a home. An important qualifying element of this loan is attending and completing the homebuyer education program.

USDA Loans:

USDA loans are government-backed mortgages that are guaranteed by the United States Department of Agriculture. They are available to borrowers in rural areas and typically require no down payment.

VA Loans:

VA loans are government-backed mortgages that are guaranteed by the Department of Veterans Affairs. They are available to eligible veterans, active-duty service members, and certain surviving spouses. They typically require no down payment and have more relaxed credit and income requirements compared to conventional mortgages.

Owner Financing:

This is a great option if the seller owns the property free and clear. With an owner-finance loan, a property seller loans part or all of the purchase amount directly to the buyer, who makes mortgage payments directly to the seller. This type of financing can be beneficial for buyers who may not have the necessary funds to make a downpayment or qualify for traditional loan options.

It's important to note that not all lenders offer all types of mortgages, and the terms and conditions of the loan may vary. Therefore, it's essential for borrowers to shop around and compare different options before choosing a lender. Each option has its own set of terms and conditions, and it's important to choose the best option for your needs. By researching and comparing different options, you can make an informed decision and find the best mortgage for your situation.