Find out which home financing option is best for you

A big part of every couple’s dream is to own a home. While it may not be a home with a white picket fence, green lawn and a pool in the backyard but it’ll be yours once escrow closes and you get the house keys.

There are several different ways to finance your first home purchase. The most common practice has been to provide up to 20 percent of the purchase price upfront to ensure your home has equity when you buy it. It also signals to the seller that you’re a serious homebuyer who is prepared for homeownership.

After the down payment, a mortgage usually covers the rest of the purchase price. There are different type of mortgages available, including fixed- and adjustable-rate mortgages. Here are a few of the ways you could finance a home purchase.

FHA assistance

The Federal Housing Administration, also known as “FHA”, provides mortgage insurance on loans made by FHA-approved lenders throughout the U.S. This government agency provides programs for first-time home buyers and helps them purchase a home without needing the typical 20 percent down. It is important to note that you’ll heed private mortgage insurance if you decide to provide less than a 20 percent down payment.

100-percent mortgage financing

Travis Credit Union offers 100-percent mortgage financing to buyers with very good credit. The down payment and closing costs can be a big obstacle to owning a home, and a zero-down payment option is an alternative home financing solution for responsible borrowers who don’t have access to large amounts of money.

Traditional 20-percent down

While saving for a huge down payment may take years to build up, it is the best in terms of equity and financial planning. Putting down 20 percent usually allows for you to not be “upside down” on your loan, or owing more than the home is worth. Of course, an entry-level home may cost around $300,000, and 20-percent of that is $60,000, an amount many people don’t have sitting in their checking or savings account.

Fixed- or adjustable- rate mortgage?

A fixed-rate mortgage is simple enough: the interest rate on your loan won’t fluctuate. It will always stay the same. However, an adjustable-rate mortgage will change with the markets if necessary. You may come into your mortgage with a low interest rate – say below 5 percent – and you may come out of it with an interest rate above seven percent.

Travis Credit Union’s Home Loan Center can help you understand the home-buying process and your home loan options. Call one of our knowledgeable and friendly mortgage loan consultants at (888) 698-0000 to get started on your home loan!

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