Kinds of Mortgage Loans To Familiarize Yourself With
Buying your first home is very exciting, but it can also be overwhelming, especially if you think about the amount of money you will spend. Fortunately, there are different kinds of mortgage loans that will help you finance that dream house you’re eyeing.
Get to know the different kinds of mortgage loans you can get, so you can familiarize yourself with them and know which will work best for you.
1. Adjustable Rate Mortgage
Adjustable rate mortgages have interest rates that fluctuate depending on the condition of the market. There are a lot of adjustable rate mortgage products and some have a fixed interest rate for a specific number of years before the loan resets. If you prefer this type of mortgage loan, you need to inquire how much the interest rate can go up and how much the monthly mortgage rate can increase. This will help you prepare for loan interests.
2. Fixed-Rate Mortgage
For the fixed-rate mortgage, this is where the interest rate will be the same until the end of the term. Fixed mortgages can usually be as short as 15 years and can be as long as 30 years. Since the loan will always be the same monthly, you will be able to budget each month for you to pay back your loan.
3. Government Insured Mortgages
Remember that the government of the United States is not a lender, but it has a role to help the people of America get their own homes. There are three agencies under the government who can help – United States Department of Veterans Affairs, United States Department Of Agriculture, and the Federal Housing Administration.
United States Department Of Veterans Affairs – This loan gives the lowest interest and flexible portages for US military members, for veterans, those in active duty, and their respective families. There is no required down payment, while the closing costs are capped and can be paid by the seller itself.
United States Department of Agriculture – This will be responsible for helping borrowers who are moderate to low-income earners. But the home you can acquire can only be under the area of the USDA. They also don’t require down payments.
Federal Housing Administration – This loan will help homeowners to borrow without having to provide a huge down payment. But you will need to have a 580 FICO score and a maximum of 3.5% financing. If your score is 500, then you may be required to provide a 10% down payment.
4. Jumbo Mortgages
Jumbo mortgages are known as conventional loans with no loan limits. This means that the prices of homes can exceed the limits of a federal loan. In 2018, a single family’s maximum home loan in the United States is $453,100 based on the Federal Housing Finance Agency.
5. Conventional Mortgages
The conventional mortgage is a loan that is not insured by the Federal Government. There are two kinds of conventional mortgages – non-conforming loans and conforming. The conforming loan has a maximum limit that is set by Freddie Mac or Fannie Mae, which are government agencies under United States mortgages. The non-conforming loan is the type that doesn’t follow the rules that confirming loans have.
If you are going to pay a 20% down payment, then the lender can give you a conventional loan. Conventional mortgages can be used for investment properties, a second home, or a primary loan.
These are all the kinds of mortgage loans that you need to familiarize yourself with, especially if you are planning to get a new home for yourself and your family. We hope you can find which loan suits you and your budget the best.
Based on Materials from Bankrate
Photo Sources: Mortgagepartner, Get a Rate, Kelowna