Entrepreneurs face tough decisions when it comes to personal finances. There always seems to be a capital shortage. If you are looking forward to buying a home, but you don’t have the means, don’t worry, you can apply for a home loan. There different types of loans according to how long will it take you to pay, interest rate, and other options. You have the freedom to choose between these (if you qualify). To help you out, we are describing them below.
Fixed Rate
This is the most common home loan available. This is a fixed rate loan that works with the single interest rate and monthly payments. The timetable usually extends to 15-30 years.
People with predictability and no interest to move anywhere else should take advantage of such loans. You are paying a relevant amount for the time you borrow. The longer your term is, the higher interest you pay. This is the way loans work. If you are going to stay in your new home for a long time, then you should consider this option.
Adjustable-Rate Mortgage
These offer lower loan than fixed ones. But you are also cutting your time short to 10 years. If you fail to pay within the given time, your interest rate will rise.
If you have low credit score, then this is a great option for you. People with bad credit history have a hard time getting good interest rate; the Adjustable Rate Mortgage helps to lower interest rate for easy home ownership. These loans are also ideal for people looking forward to moving and sell their home before the fixed rate period finishes, and interest rate starts climbing.
FHA Home Loan
While most loans require you to make a 20% upfront, you can easily pay less than 5% with FHA Loans. Almost every detail is similar to the common loan, except for the lower upfront. This makes FHA attractive to many potential buyers.
People with little to no saving as an upfront are attracted to such offer, but they fail to see that FHA doesn’t offer much flexibility. Interest rates are fixed, and they are high. Also, you will have to pay mortgage insurance which will be 1% of the whole amount.
Bridge Loan
These are also known as a gap, or repeat financing. This is an incredible option if you want to sell your previous home. Lenders will evaluate your current and new mortgage into one payment. Once you sell your house off, you can easily pay off the mortgage and refinance.
You need an excellent credit history to apply for this home loan. Yes, you need low debt to income ration, and you have to finance 80% of both homes to make this work. Make sure you fulfill the criteria, or you will end in a financial meltdown.
USDA Loan
These are specifically designed for people leading their lives in rural areas. The government backs every single penny, so you don’t have to worry about the upfront or high-interest rates. Families who are financial unwell are eligible, such loans because the plan is designed for low-income subjects.
It’s important to know there are options available to you when financing a startup and trying to buy a home. As an entrepreneur, you already know the challenges. You should be able to find a great solution to your home financing that doesn’t interfere with building your business.
