The Basics of Home Loans

Alyssa Serrao, 6/17/2019

Buying a home is complicated enough, loans shouldn’t contribute to the stress. With so many different home loans offered, it can be confusing to know which one you would benefit from most! Many different variables contribute to which loan will best suit you and many home-buyers do not know where to begin; let’s find which loan is the right fit for you!


Different Types of Loans

Fixed-Rate Mortgage Loans

This fixed-rate mortgage loan is the most common type of loan; it guarantees the same interest rate each month for the entirety of your repayment period, which means your monthly payment will remain the same amount throughout the entire term of your loan. The repayment period typically lasts 15 or 30 years. With this loan, you will always know what to expect. With the rise and falls of interest rates, your rate will stay the same! The Home Buying Institute recommends this loan for most first-time buyers and those wanting to spend many years in the home they buy.

Adjustable-Rate Mortgage Loans

With this loan, interest rates are typically lower than fixed-rate mortgage loans. But with adjustable-rate mortgage loans, the interest rates will change over time. Typically, the initial 5 to 10 years will be a fixed rate and then after that, the rate will change approximately once a year. The change in the interest rate will depend on current interest rates. In these common cases, the adjustable-rate mortgage loans are referred to as a “hybrid” product, since there is a period of a fixed rate. For example, there is a 5/1 adjustable-rate loan. With the 5/1 loan, there is a fixed interest rate for five years and after the five years, the rate adjusts annually. The adjustable-rate mortgage loans are great for those with a lower credit score, since it would be harder to get a good interest rate with a fixed-rate loan. This loan is also great for people who are looking to sell relatively soon after purchasing their property (during the lower fixed-rate period for the first couple of years). Another comforting fact is that most interest rates do have a cap that does limit how much a rate can change. Make sure to ask about this if you are planning on living in the home longer than the initial fixed-rate portion of the loan.

FHA Loans

The FHA loan is a government-insured home loan that is open and available to all types of home-buyers. This loan allows the borrower to make a down payment as low as 3.5% of the purchase amount, whereas typical loans require a down payment of 20% of the purchase price. This loan is great for those that don’t have a huge saving for a down payment but this loan is not extremely flexible. There is usually a loan limit of $417,000, a fixed interest rate, with a loan life or repayment period of 15 or 30 years. The downside to this loan is that the borrowers are required to buy mortgage insurance, which will increase the amount of your monthly payments.

VA Loans

If you have served in the United States military, the VA loan might be the one for you! The VA loan is guaranteed by the federal government, meaning the government will reimburse the lender for any losses caused by the borrower. A Veteran Affairs loan can be an extremely beneficial loan, sometimes requiring no down payment and no mortgage insurance requirements. This loan is great for veterans who have served 90 days during wartime, 180 days during peacetime, or 6 years in the reserves. The VA does have strict requirements on the housing bought with this loan; the place must be your primary residence and it should meet “minimum property requirements,” which means no major modifications to the home.

USDA Loans

USDA Rural Development loans are created for families in rural areas who meet certain income requirements. This program is managed by the RHS (Rural Housing Service), which is a part of the Department of Agriculture. This loan requires no down payment and can offer discounted interest rates. This loan is great for people in rural areas who have a low and steady income. An important thing to know is that with these loans, a person’s debt cannot exceed their income by more than 41%. You also will have to purchase mortgage insurance with this loan.

Bridge Loans

The bridge loans are great if you are buying a property before selling your previous residence. This loan is great for people with great credit and those who do not need to finance more of 80% of the combined amount of the two properties.


Whatever loan you decide is best fitting for you, MüvzU is here for support. MüvzU is here to make your move into your new home as easy as it can be. We can even help you with mortgage lenders near you! The goal of MüvzU is to connect people to local and trusted home service professionals in the most convenient way. Without giving out your personal information, MüvzU makes searching for professionals in buying and selling painless. Happy shopping!