Basic types of home loans.

March 28, 2019 joshharbst No comments exist

There are 2 main forms of debt when speaking about finances. If you have made a deal with your soul as a bargaining chip, I have no comment. The 2 forms of debt are good debt and bad debt. Good debt is generally debt you can use to leverage assets that will make you money in some form or another. Bad debt is when we go into debt for things that depreciate or unsecured debt which usually comes with a higher interest rate. With this logic it is safe to assume that home loans are good debt and credit cards are bad debt. With that said, a home loan specialist can assist most people with lining up financing. Working with a professional is essential in order to have a human determine the best “product” for you. They understand that home loans can be changed and manipulated to best suit your situation. I scare easily of huge nationwide home lenders that offer service over the internet and phone. You rarely speak with someone familiar to you and your circumstances. The service is usually less than stellar and accommodating your needs isn’t always the first priority. Now, let’s get to the loans.

1. FHA – This is a common loan that is insured by the Federal Housing Administration. It requires 3.5% down and sometimes a lender can provide a 2nd loan for that amount allowing for 100% financing. Because it’s insured by FHA, appraisers will be certain that the home is livable and doesn’t require extensive repairs. This loan is a great product for folks who don’t have a great amount to put down.
2. VA – For our veterans of armed services, this product is available. It also requires an inspection as it’s insured by the VA. It can allow for 100% financing and even won’t allow for the buyers to pay for certain closing costs. It can be a great product for Veterans.
3. Conventional – This is another very common loan that buyers can put down 3% or greater. Usually, the larger the down payment, the lower the interest rate. There are no inspections for this loan as lenders really just want to ensure the home is worth the asking price when the appraiser comes out.
4. RD – Rural development. I would recommend speaking to your lender about this loan. In Idaho, where I practice, it is only allowed in certain Rural areas. The benefit is 100% financing and low payments but again, the area determines the eligibility.
5. Owner Carry – This is a loan that the current owner of the home actually carries the note on the purchase. This can be amortized over 30 years or a balloon payment can be required in a certain time frame to ensure the seller can cash out at a certain point. These terms can be negotiated with the seller and usually come at a higher rate since it’s technically private money.

For more detailed information regarding home loans, please visit a loan officer. They know much more than is in this piece. If you need a great lender in the Boise Metro area, I’m happy to refer you to one that I work with regularly. Please let us know what questions you have regarding real estate. Use our site to search for homes and contact us with questions. For real estate education, refer to our sister website at

Leave a Reply