The biggest dream of common people is nothing but owning a shelter for himself. In order to buy a home, a buyer must use cash or he needs to take out a loan. A loan is a safer option that comes with a fixed or adjustable interest rate. Most potential homebuyers consider taking out a conventional loan as the only option for them. But there are several other choices also. It’s quite possible that one of these lesser-known mortgage loans listed below will be helpful in your situation.
1. FHA 203(k) Loan
There are two types of FHA 203(k) loans - a) Regular and b) Streamlined. FHA loans are best for buying homes that need repair works, upgradation or perhaps reconstruction. If you want to reconstruct, use the regular 203(k) loan. If there are repair jobs, then choose a streamlined 203(k) loan. Streamlined 203(k) loan will help you in home improvement jobs without any plans, consultation, engineers, and architects.
You can use a 203(k) loan for the following:
- Structural reconstruction or alteration
- Modernization and improvements to the home's function
- Removal of health and safety issues
- Improve appearance and eliminate the outdated look
- Important landscape works and site improvements
- Reconditioning or replacing plumbing
- Adding or replacing roofing, gutters, and downspouts
- Adding or replacing floors and floor treatments
- Enhancing accessibility for a disabled person
- Making energy-conservation improvements
A conventional loan taken for home improvement might have characteristics like high-interest rates, a short duration of repayment, and balloon payment. So, a 203(k) loan may become handy for it’s long-term fixed or adjustable-rate of interest.
2. Rural development loan
Rural development loans are best due to zero-down financing and financing for repairs. The home must be in a rural neighborhood as your primary residence, you must fulfill the income eligibility criteria to qualify for this loan. This loan program supports lenders to work with low and moderate income families in rural neighborhoods.
3. VA Loans
There are several benefits of a Veterans Administration (VA) loan, they are as follows:
- Flexible credit criteria
- Low-interest rates
- Zero down payment
- No PMI
To qualify for a VA loan, you should be on active duty, a widow or widower of a veteran, or on reserve.
4. Reverse Mortgage
Through a reverse mortgage, you can get equity in your home. You’ll get the payment in one lump sum amount or in multiple payments. You don’t need to pay off the loan until your death, you’ve decided to sell your home, or you’re going to shift to another place. You need to be a senior citizen to avail this mortgage, it means your age must be least 62 years. You can opt this type of loan if you are desperate for cash flow. The upfront fees are high and there is a possibility that you may lose your home.
5. FHA Back to Work Program
FHA back to work loan may come handy if previously you had a bankruptcy, foreclosure, short sale or deed-in-lieu. You’ll have the waiting period of one year, and you must pay off all your debts within that year.
Above five types of mortgage loans are not well known, but they have provided a lot of support to the needy common people to fulfill their biggest dream.