Financial Tools
Financing the Purchase of Your Home

There are basically three types of financing available for the purchase of your new home. Of these three, there are many programs available from which you may choose. The first type is government insured or government financing, the second is conventional financing and the third is owner financing.

Government insured or guaranteed financing includes mortgages from the Federal Housing Administration (FHA) and the Veterans Administration (VA). Also included in this group are lower interest rate bond-issue loans targeted for first-time home buyers at specific income levels.

Conventional financing is available in two categories: fixed and adjustable-rate mortgages. The interest rate on a fixed-rate mortgage does not vary throughout the life of the loan and therefore the initial rate is usually higher than the initial rate of an Adjustable Rate Mortgage (ARM). For ARMs, the interest rate varies at pre-specified periods, for example, one-year adjustable. Most ARMs start off at a lower interest rate than most fixed loans which makes your initial monthly payments lower and have lifetime interest rate caps. You should consult your lender to make sure you understand how your mortgage works.

Another method used to finance the purchase of your home is Owner Financing, often referred to as a Purchase Money Mortgage. This is a mortgage held by the seller of the property to facilitate the sale. In some cases the seller will use the Purchase Money Mortgage as an investment vehicle. It is likely that an owner-held mortgage will have more favorable interest rates and terms than conventional or government loans.

Whichever type of financing you choose, get all the facts before you commit. You may obtain assistance in the financing of your home through a Realtor®, mortgage banker, commercial bank, savings and loan association, credit union or mortgage broker.