Before you purchase a home, it’s important to educate yourself on the various types of mortgages you can get so you can make the right decision when the time comes to choose yours.
CONVENTIONAL MORTGAGE A conventional mortgage is a home loan that’s not insured by the federal government. There are two types of conventional loans: conforming and non-conforming. Conforming loans are loans for amounts that fall within the maximum limits set by Fannie Mae or Freddie Mac (government agencies that back most U.S. mortgages). Loans that do not meet these guidelines are considered non-conforming. Jumbo loans are the most common type of con-conforming loans.
JUMBO MORTGAGE Jumbo mortgages are conventional loans that have non-conforming loan limits. Your credit score generally must exceed 700 and you are required to make a larger down payment. However, it allows buyers to to borrow more money to purchase a more expensive home.
GOVERNMENT-INSURED MORTGAGE The U.S. Government is not a mortgage lender, but it plays a role in helping more Americans become homeowners. There are several types of government backed mortgages including Federal Housing Administration (FHA loans) , U.S. Department of Veterans Affairs (VA loans), United States Department of Agriculture (USDA loans) and more. Government-insured loans are ideal for buyers who do not have funds for aa large down payment and can not qualify for a conventional loan.
FIXED-RATE MORTGAGE The most popular mortgage is the fixed-rate mortgage. It is ideal for homeowners who expect to stay in their home for many years. With a fixed-rate mortgage the interest rate stays the same over the the life of the loan. Fixed-rate loans are typically available in terms of 15 years, 20 years or 30 years.
ADJUSTABLE-RATE MORTGAGE This type of mortgage offers a lower interest rate and monthly payment at first, then slowly increases as time goes on. An adjustable-rate mortgage can be beneficial if you only plan to own the home for a few years.
Do you have more questions about the different types of mortgages?