Obtaining a mortgage is a crucial step in purchasing your first home and there are several factors for choosing the best one. Here’s a review of the pros and cons for each type of mortgage loan available in the USA.
Mortgage Pre-approved mortgages
Pre-approved mortgages are the most widely available type of mortgage loans in the USA. A pre-approved loan provides you with the opportunity to have a loan approved in a very short time. The main benefits include an early down payment which ensures the balance of your down payment can be put toward the principal of the loan before the loan is pre-approved, and a short loan term of three to five years.
If you have a strong credit history and can demonstrate you have a steady employment, a pre-approved loan can make purchasing a home in the USA easier.
However, they are not suited for people with low credit history or anyone looking for their first home with a high down payment.
Mortgage pre-approvals should be used for people planning to move to the USA in the future. This is because if the seller doesn’t follow through with the loan application you can have a complaint from the buyer’s bank. If you have an annual income of less than 3 million yuan, and the property doesn’t sell within three years, then you would have to wait three years before you can start making payments again.
The monthly mortgage repayments are based on the property value and interest rate respectively. The interest rate is fixed and range from 1.85% to 3.5%.
Approval of loans without a security
This loan type can be used if you have low credit history, have a high deposit or are purchasing your first home. It’s beneficial for people with low or no credit history, who need to provide a security to demonstrate their income.
You can apply for this loan if your deposit exceeds 20 million yuan, and you have little or no collateral.
Mortgage after a security deposit
Most people are looking for a secure way to secure their money when buying a property. According to companies like SoFi, the security deposit is usually offered as a purchase price and a mortgage loan. The lender will offer this mortgage to you only after your deposit is provided as security.
This mortgage can be approved if the property was registered prior to 2009 and the property value does not exceed 10 million yuan. If the property value exceeds 10 million yuan, the maximum amount to be deposit will be 25% of the property value.
Properties that have already been approved before this year may be subject to the 10% share restriction. This will mean that after the security deposit is provided, if the property value exceeds 10 million yuan, the maximum deposit required will be 10% of the property value.
Risks and Controversial offers
Most interest rates in the USA are fixed rates which means there is no other ways to increase your mortgage interest.
Unlike most of the other mortgage types, there are no other ways to increase the interest rates, there is no opportunity to request a new rate from the lender. The lender is required to set a new fixed rate without any changes. So it is more or less a guarantee that your interest rate will never change again.
With regards to other mortgage types, you can negotiate with the lender to accept a lower interest rate for a longer period of time. However, this applies only for the first half of the mortgage term. After that the default interest rate will be the same.