Buying a home is a big commitment. One of the first steps is to talk with your bank or mortgage broker to find out your different types of mortgage options.
A conventional mortgage is one that is not insured by the federal government. There are two types of conventional mortgage loans, conforming and non-conforming. A conforming loan falls within the maximum limits that are set by Fannie Mae or Freddie Mac. This type of loan is ideal for a buyer that has a strong credit score, stable income and job history, and at least a percentage of the down payment.
A jumbo mortgage loan is for the houses that home prices exceed the federal loan limits. These loans are common in areas where the home prices are higher than the average cost. Additional documentation is often required to qualify for a jumbo mortgage loan. Qualifiers often need to have at least have a 10-20% down payment, show significant assets, and a strong credit score.
While the government isn’t a mortgage lender, it does have three agencies that help back mortgages in the United States: the federal housing administration, the U.S. Department of Agriculture, and the U.S. Department of Veterans Affairs.
Loans from the Federal Housing Administration are for those who don’t have a large down payment and/or credit that could use improvement.
Department of Agriculture loans help those in rural areas qualify for a mortgage loan with lower-income borrowers.
Veterans Affairs loans are available to active and retired members of the US military and their families. VA loans don’t require a down payment and closing costs are generally capped.
Fixed-rate mortgages offer terms of 15, 20, or 30 years, which means that your interest rate is set for the lifetime of the loan. Your monthly loan payment will stay the same each month.
An adjustable-rate mortgage fluctuates up and down based on the market conditions. An adjustable-rate mortgage could save you a lot in interest payments over the years. However, one disadvantage is that the monthly payments are not set and could change drastically from month to month.