Are you thinking of buying a home? Congratulations! But before you do, you need to learn about the different mortgage options available in the market.
Before your mortgage professional can help you find the right mortgage for your needs, there are many factors to consider. Keep reading to learn more about the different types of mortgages.
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Conventional Mortgages
A conventional mortgage is a loan not guaranteed or insured by the federal government. Conventional mortgages are typically fixed-rate loans with terms of 15, 20, or 30 years.
Down payments on conventional loans can be as low as 3%, but borrowers must pay private mortgage insurance (PMI) if their down payment is less than 20%. PMI is an insurance policy that protects the lender if the borrower defaults on their loan.
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FHA Mortgages
An FHA mortgage is a mortgage loan that is insured by the Federal Housing Administration (FHA). It is a US government agency that provides mortgage insurance on loans made by FHA-approved lenders.
It insures loans made by approved lenders, making it possible for borrowers with less-than-perfect credit to get mortgages. The FHA program was created in 1934 to help make homeownership more affordable and accessible.
It’s also available to borrowers with credit scores as low as 580, and down payments as low as 3.5%.
VA Mortgages
Veterans Affairs (VA) home loans are one of the benefits available to eligible military service members and veterans. It offers several key advantages, including no down payment, no private mortgage insurance (PMI), and flexible credit and income requirements.
Also, VA home loans are available from a number of lenders, making it easier for veterans and service members to find a lender that best meets their needs.
USDA Mortgages
USDA Mortgages are loans made by the US Department of Agriculture to help rural homeowners finance their homes. These loans are available to low- and moderate-income rural homeowners and can be used to purchase or refinance a home.
It’s unique in that they are not available through private lenders, but are instead offered through the USDA Rural Development program.
This program provides low-interest, fixed-rate loans to eligible rural homeowners, and can help make homeownership more affordable for those who might not otherwise qualify for a traditional mortgage.
Jumbo Mortgages
A jumbo mortgage is a type of mortgage loan that exceeds the conforming loan limits set by the Federal Housing Finance Agency (FHFA). It is not backed by the federal government and therefore requires a higher level of creditworthiness and higher down payment than conforming loans.
Although jumbo mortgages typically have higher interest rates than conforming loans, they can still be a good option for borrowers with solid credit and a sizeable down payment.
Learn More About the Types of Mortgages Today
Different types of mortgages can be confusing, but this guide breaks it down so that you can choose the best one for your situation. If you’re still unsure, talk to a mortgage specialist to get more info.
They can help you understand the pros and cons of each type of mortgage and choose the best one for your needs.
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