Getting a mortgage loan can be a daunting task. However, the greater understanding you have about these loans as you begin your home buying journey, the easier it will be.
There are many types of mortgages available to choose from. They differ based on requirements, interest rates, and availability. In this blog, we list the most common types of mortgage loans, and for which type each homebuyer is best suited.
Conventional mortgages are home loans not insured by the federal government. This type is best suited for borrowers who have a strong credit score, stable employment history, and can make a down payment of at least 3% of the home’s cost.
Although not a mortgage lender itself, three government agencies back mortgages: the Federal Housing Administration (FHA loans), the U.S. Department of Agriculture (USDA loans), and the U.S. Department of Veterans Affairs (VA loans).
- FHA Loans are for borrowers who don’t have a large down payment saved up and do not have the highest credit.
- USDA Loans are for moderate and low-income borrowers. Borrowers must purchase a home in a USDA-eligible area but often are not required to make a down payment.
- VA Loans are flexible, low-interest loans for those serving in the military, both active duty and veterans. These do not require a down payment.
As per the name, these mortgages keep the same interest rate over the life of your loan. They also provide a consistent monthly payment on your mortgage and come in 15-year, 20-year, or 30-year loans.
Adjustable-rate mortgages have flexible interest rates that change with market conditions. These come with a certain level of risk but are beneficial if the home is temporary.
Jumbo mortgages are for when the home price exceeds the federal loan limits. These are best suited for affluent buyers with good credit, a high income, and who can offer a substantial down payment.
Making Mortgages Easy
If you have more questions about mortgages, don’t worry! We put together this helpful guide featuring frequently asked questions and their answers. Check out the blog here!
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