For anyone looking to buy a home in the country, a home loan is the best option to get funds. It allows you to own a property that you can pay off in installments over a period. However, buying a house is a huge decision, both financially and emotionally. Property investments are always better because they give you good returns in the long run. The state of the economy today is quite different from what it was five years ago. There has been a drastic change in the real estate market. Therefore, choosing the right mortgage plan is a crucial decision.

Types of home loans
Several factors determine the type of loan best for you. Regardless of the plan you choose, lenders will evaluate your creditworthiness and repayment history.

Here are some home loan types to choose from:

• Conventional loans
  This is the most common type of loan taken by homeowners. However, they are not insured by the Federal government. You will also be required to pay a high down payment amount and maintain a good FICO score with a low income to debt ratio to become eligible for this loan. Additionally, homeowners would also be required to pay for private mortgage insurance (PMI) because it is not covered in the loan amount. But the good news is that the interest rates are lower than government-assisted loans.
• Federal Housing Administration loans (FHA loans)
  These loans are facilitated by the Federal Housing Administration (FHA) and the US Department of Housing and Urban Development (HUD). They are ideally designed for low-income group people with poor credit histories. Therefore, it is easy to qualify for it. Even the down-payment requirement is less. This type of loan is perfect for first-time homebuyers. But the buyer needs to take private mortgage insurance to protect lenders against borrower default or if they die before they complete repayment.
• VA Loans
  This type of loan facility is designed for members of the US military (active or veteran). They help veterans to obtain a mortgage with easy loan terms. These loans do not require any down payment. However, the borrowers must request eligibility to apply for a VA loan.

Types of interest rates
While applying for a home loan, a borrower needs to decide whether to opt for a fixed-rate mortgage or an adjustable-rate mortgage. Both have their own merits and demerits.

• Fixed-rate mortgage
  In this type of mortgage, the interest rate is fixed for the entire loan tenure. It does not change, irrespective of changes in the market conditions. Therefore, the borrowers can manage their monthly budget easily because the installment would be fixed. So, if you are lucky to secure a low-interest loan during the loan period, you have locked a good rate for the entire loan duration.
• Adjustable-rate mortgage (ARM)
  This type of mortgage is specially designed for first-time homebuyers who speculate their incomes will grow during the loan period. But they are considered a risky option because loan rates are subject to market conditions. They can go both ways–lower or higher. However, it is a smart financial choice for buyers who plan to pay off their loan amount early or are financially sound in case the interest rates increase.

Taking a home loan should be a smart decision. Borrowers may find it difficult to understand which financial option is best for them, especially if they are doing this for the first time. So, it is best to take some time out to understand your current financial conditions. Invest in a home you can afford and finance accordingly. It is always a good idea to put a substantial amount as a down payment because it gives you leverage to negotiate terms with money lenders. Weigh your options carefully!