Top 5 Types of Mortgages
Applying for a mortgage can be a daunting and confusing task, especially if it’s your first time – but it doesn’t have to be! This article will break down the most popular types of home loans to give you a better understanding of what products are out there & what may work best for your situation!
1. Conventional Loan:
A conventional loan is the most popular type of loan. Conventional loans are so popular because they can accommodate a wide variety of situations. This loan type can be used on a primary home, a second home or an investment property. There is a maximum amount set each year for this program which is known as the conforming loan limit. Anything above this limit would be considered a jumbo loan – more to on that later. It has various loan terms available, ranging from 8 to 30 years. The most common terms are 15 and 30 years. While there is a minimum FICO credit score requirement of 620, borrowers can put as little as 3% down for a down payment.
2. FHA Loan
FHA loans are another very popular type of loan. This type of loan helps make homeownership possible for borrowers who may not have as strong of a credit score or who aren’t able to afford a sizeable down payment. FHA loans are supported by the government agency known as the Federal Housing Administration. The minimum FICO credit score for an FHA loan is 580, although it’s important to remember that lenders may have different credit score requirements and may require a higher score. Borrower’s can put as little as 3.5% for a down payment.
3. VA Loan
A VA loan is reserved for a very specific and special subset of borrowers – members of the U.S military and their families. This type of loan provides flexible and low interest rate options for those actively serving in the U.S military, veterans, and their spouses. VA loans do not require a down payment or mortgage insurance, and they don’t have a minimum credit score. Closing costs are typically capped at a certain amount or are paid by the seller. The Veterans Administration, another government agency, supports these loans and helps ensure that the members of our military are in the best home situation possible.
4. USDA Loan
A USDA loan is also a government supported type of loan. USDA stands for the United States Department of Agriculture and fittingly this loan type is intended to help borrowers in rural areas that have moderate to low income ranges. The home you intend to purchase must be in a USDA eligible location. Borrowers must also meet certain income limits to qualify. There are situations where a borrower would not need to bring a down payment, but there may be USDA specific fees.
5. Jumbo Loan
Jumbo loans are just as they sound – really big. They tend to be common in higher cost of living locations, like Los Angeles or New York City, where home prices are higher. A jumbo loan allows a borrower to borrow more money and afford a more expensive home. With that, comes some additional requirements. This loan type requires a larger down payment than the others listed here – typically 10 to 20 percent of the loan amount. More documentation is typically required to prove significant assets. You also cannot have a debt-to-income ratio over 43 percent.
For more information, chat with us at callhallfirst.com or give us a call at 866-Call-Hall.