Summary: Buying a home is a huge investment for homebuyers, and it usually requires the financial assistance of a mortgage. If you are planning to buy a home in Idaho, you’ll want to get to know what your mortgage options are to help you find this investment. There are plenty of mortgage options out there, so your job is to find out what they are and what they can offer you.
No two homebuyers are exactly alike, and as such, they each may require a different type of mortgage to help them finance the purchase of an Idaho home. Luckily, there are different types of mortgage products and programs available, each with their own features. Let’s have a look at some of the most common Idaho mortgage programs used by homebuyers in the state.
An Overview of Idaho Home Loan Programs
Getting familiar with the various features of different loan programs is helpful in narrowing down which loan option is best for you. And once you determine their features, it’s helpful to weigh the pros and cons of each mortgage type.
The following are some of the more common Idaho loan programs for buyers:
Perhaps one of the most common and popular mortgage programs out there is the FHA loan. These home loan programs are backed by the Federal Housing Administration and make it easier for many homebuyer hopefuls to realize their dreams of homeownership. The lending criteria is a little more lax compared to other mortgage types, which is why this type of home loan is quite popular among the first-time home buyer demographic.
There are a couple of reasons why FHA loans may be easier to qualify for. For starters, the minimum credit score required is lower than that needed to secure a conventional loan. Generally speaking, borrowers may get approved for an FHA loan with a credit score as low as 500. But those who want to be able to put a minimum down payment amount may need a credit score of at least 580.
Speaking of down payments, that’s another attractive feature of FHA loans. Borrowers can put down as little as 3.5% towards the purchase price of a home. That means it can be easier for borrowers to scrounge together enough money to secure a mortgage to buy a home in Idaho.
So, borrowers who don’t have a lot of money saved up for a large down payment or have less-than-stellar credit may find an FHA loan a good option.
Related: Idaho FHA loan limits
It should be noted that borrowers who take out an FHA loan will have to pay mortgage insurance premiums. This can slightly increase your monthly mortgage payments. More specifically, there are two insurance premiums that are needed for the majority of borrowers who take out an FHA loan in Idaho:
- Upfront mortgage insurance premium (MIP), which costs 1.75% of the mortgage amount.
- Annual MIP, which is usually around 0.85% of the loan amount on average, though the amount may vary.
Even though mortgage insurance premiums must be paid on FHA loans, their perks tend to outweigh this drawback for most borrowers who take out this type of loan in cities like Boise, Nampa, or Pocatello.
Unlike FHA loans, conventional mortgages are not guaranteed by the federal government but are generated in the private sector instead. Borrowers who take out a conventional mortgage may or may not have to pay mortgage insurance, but that will depend on the down payment amount they are able to make.
If you are able to put down 20% towards the purchase price of your home (or more), then you will not have to pay mortgage insurance. But anything less than a 20% down payment will mean that private mortgage insurance (PMI) will have to be paid. These premiums are charged by private insurers, unlike with FHA loans.
While having to make additional payments on top of your mortgage payments might not sound appealing, keep in mind that this type of insurance makes it possible for many borrowers to secure a mortgage and buy a home in Idaho when they may otherwise not have been able to afford to do so with lower down payment amounts.
30-Year Fixed-Rate Home Loans
A staple in the world of mortgages in Colorado is the 30-year fixed-rate mortgage. Like the name would imply, these mortgage programs feature 30-year terms and fixed rate structures, which means 30 years is provided to repay the full loan amount, during which the interest rate will not change.
This type of home loan program is attractive to many borrowers because the mortgage payment amounts are lower as a result of having a longer amount of time to repay the loan amount in full. And since the interest rate remains fixed throughout the duration of the mortgage term, there are no changes to mortgage payments. This predictability makes budgeting much easier for most borrowers.
15-Year Fixed-Rate Mortgages
15-year fixed rate home loan programs are similar to 30-year fixed-rate mortgages in that they feature interest rates that remain fixed throughout the mortgage term. In this case, that term is 15 years.
Borrowers who can afford more expensive mortgage payments can benefit from tens of thousands of dollars or more saved over the life of the loan that would otherwise have been spent in interest. They can also be mortgage-free faster, since they have 15 years to pay off their mortgages compared to longer-term loans like the 30-year fixed-rate mortgage.
Like FHA loans, VA loans are backed by the government. They are offered to veterans and members of the military who qualify. This is a great loan option for qualified applicants to take advantage of a zero-down payment option. The credit requirements are also less stringent compared to other loan types, making them easier to get approved for.
Conventional and FHA loans have limits as far as how much borrowers can borrow, and these limits are based on the county in which they are purchasing their home. When the loan amount goes over these limits, the loan is considered a “jumbo loan.” Loan limits are generally adjusted every year to reflect changes in home prices.
Jumbo loans are used by homebuyers who are purchasing a home that is too expensive for a conforming loan amount to cover. In Idaho, the conforming loan limit for 2020 is currently $510,400 for most counties, and the FHA loan limit for this year ranges from $331,760 to $765,600 for 1-unit properties, depending on the county.
Hybrid Adjustable-Rate Mortgages (ARMs)
While the mortgage rate stays the same throughout the term of a fixed-rate mortgage, it changes with an adjustable-rate mortgage (ARM). The reason why the term “hybrid” is added here is because these mortgage programs actually have features of both fixed-rate and adjustable-rate mortgages.
The rate remains unchanged throughout the initial time period, but will then adjust at various intervals after that.
The 5/1 ARM is one of the more common types of ARMs in Colorado. With this version, the interest rate does not change over the first five years of the term, then will adjust every year after that.
Colorado home buyers who are planning to move out of their home before the introductory period is up or are financially comfortable with the risk of rates increasing at various intervals may find these hybrid ARMs a great way to save money in interest paid over the long run. That works only if the interest rate offered during the initial introductory period is lower than the posted fixed-rate at the time of mortgage approval. That said, it is important to understand how these mortgages work in great detail before choosing it.
Other versions of ARMs are also available, such as 3/1 and even 7/1 hybrid ARMs. In these cases, the initial period is 3 and 7 years, respectively, after which the rate adjusts every year.
Which Idaho Home Loan Option Is Best Suited For You?
While these may be some of the more common loan options in Idaho, they are certainly not the only ones out there. This article was meant to give you a good head start on the world of mortgages in Idaho. You are encouraged to speak with a seasoned mortgage specialist to help you go over all your options and determine which is best for you.
Want to Apply For a Mortgage in Idaho?
If you are considering buying a home in Idaho in 2020, then you’ll want to work with professionals in mortgages to secure the right program for you. At Sammamish Mortgage, we offer many mortgage programs for borrowers in Washington, Oregon, Idaho, and Colorado. Call us us today to apply for a mortgage or to have any of your mortgage-related questions answered.