Are you getting ready to purchase a home? Then you are probably aware how confusing Idaho home loans can be.
There are so many different options, how can you be sure that you’re getting the right loan for your situation?
Read this guide to the types of home loans available in Idaho.
What to Look for in Idaho Home Loans
Your goal when shopping for a home loan is to get the type of loan that’s right for you at the lowest possible rate.
Loan rates are affected by many factors like the 10-year Treasury Yield and sometimes, current events. You can’t control those things, but there are many personal factors you can control.
Basically, banks take a huge risk when they lend money for a home. They need to lower that risk as much as possible. To do that, your financial history will be under scrutiny.
Your credit score will be the first factor taken into consideration. They’ll look at how much you owe vs. how much credit you have available, and your track record in paying on time.
The loan amount plays a role in your home loan rate. Surprisingly, the lower the loan, the more interest you’ll pay. The reason why is that lower home loans aren’t as profitable for banks, so they’ll charge a higher rate for smaller amounts.
That doesn’t mean that you should go out and get a massive home. You can get a very affordable home in Idaho, like the ones listed here from SellIdaho.
Other factors include the location of the home and the down payment amount. If you put down more of a down payment, that lowers the bank’s risk. They’re going to be more likely to reward you with a lower interest rate.
Conventional Home Loan
The most common home loan on the market is the conventional home loan. Other loans that we’ll go over, such as an FHA and VA loan, are insured by the government. That means that if you default, the government covers the loan.
The terms of the conventional Idaho home loans are usually 30 years, but you can opt for a 15-year conventional mortgage rate.
One important thing to consider with this loan is the loan to value ratio (LTV). That’s the percentage of the loan vs. the home’s value. The higher the LTV, you’re likely to pay for private mortgage insurance (PMI), which is added to your monthly mortgage payment.
An LTV of 80% or higher typically required PMI.
Since this loan isn’t backed by the government, banks usually require a higher down payment than with other loans, usually around 20%. Remember, the higher your down payment, the likelihood you’ll save money by not having t pay PMI and you’ll get a better loan rate.
Conventional loans tend to fall under two categories: fixed rate and adjustable rate.
A fixed rate home loan is a loan where you pay the same rate throughout the life of the loan. This is very easy to deal with for budgeting purposes because you have consistent payments.
On the downside, a fixed rate loan means that you could pay more in interest on the life of the loan. This is a great loan to get when interest rates are low so you can lock that rate in for the life of the loan.
If you lock in a high mortgage rate, then you’re stuck paying that rate even if interest rates drop.
Adjustable Rate Mortgage
An adjustable rate loan, on the other hand, is a loan where the interest rate can fluctuate during the life of your loan.
Usually, these loans have a fixed rate for the initial period of five years, and then the rates adjust every year.
If you are a first-time homebuyer, chances are you’re eligible for an FHA (Federal Housing Administration) loan.
With an FHA loan, the loan is insured by the government and the loan is made by a lender that is FHA approved. These Idaho home loans are insured by the government, you can buy a home for as little as 3% down on the price of the home.
This is a great option for folks that have had a bad credit history and can’t get approved for a conventional loan.
On the downside, you’re going to have to pay a mortgage insurance premium.
Veteran’s Home Loan
This loan is administered by the Veteran’s Administration, which is why this loan is called a VA loan.
This loan is specifically for veteran’s, service members, and surviving spouses.
Similar to an FHA loan, a VA loan is made by an approved lender and backed by the VA. With these loans, a down payment isn’t required and you won’t be charged for mortgage insurance. That can save you thousands of dollars over the life of the loan.
On the downside, you do have to pay a funding fee, which is around 2% of the price of the home. To make the payments easier, you can roll the funding fee into your loan.
The USDA provides loans to low-income people who live in rural areas in Idaho. These loans are meant for people who don’t have a realistic path to homeownership.
Regardless of what kind of Idaho home loan you get, you’re going to need to get a notary for your contracts and mortgage paperwork.
Down Payment Assistance Programs
If you’re stressed out about having to come up with a down payment, it is possible to get help from organizations like the Idaho Housing and Finance Association.
They have an assistance program to help buyers with good credit to come up with the down payment and closing costs.
Get Help with Idaho Home Loans
Getting a home loan in Idaho can be daunting because there are so many options available. However, with the right real estate team in place, you have people who can guide you through the process and make it as stress-free as possible.
Are you ready to put your real estate team in place? Click here to find out how you can find the right real estate agent.