Purchasing a home is one of the biggest purchases an individual can make. While paying cash for your home is always an option, the majority of buyers do not have this luxury. This is where mortgages come into play; unsure which mortgage you’d qualify for? Read on to discover the 5 types of mortgage loan options, and what they entail.
It is essential for homebuyers to shop around for a mortgage. By shopping around for a mortgage, this provides an idea of what is affordable for you and for an opportunity to compare loan products, interests rates, closing costs, and lender fees. This is where Future Home Loans comes in. Being a mortgage brokerage, we’re able to shop the rates for you allowing for a simpler mortgage process. We have access to hundreds of lending options, ensuring that you obtain the best of the best.
Before beginning the process of shopping for a mortgage, it is extremely helpful to have an understanding of the different types of mortgages out there in the market. There are 5 types of mortgage loans, each having their own advantages and disadvantages depending on the borrowers’ needs.
- Fixed-Rate Mortgage: This type of mortgage loan allows the borrower to keep the same interest rate over the entire set lifespan of the loan. According to Investopedia, once the fix-rate home loan is secured the interest rate doesn’t change with the market. (Source: Investopedia). This type of loan has terms that can range from 10 to 30 years and is good for borrowers who want predictability.
- Adjustable-rate mortgage: A type of mortgage loan that has an interest rate that can change periodically which means the monthly payments can go rise or fall. According to Investopedia, “an ARM can be a smart financial choice for home buyers that are planning to pay off the loan in full with a specific amount of time or those who will not be financially hurt when the rate adjusts”. (Source: Investopedia)
- Government Loans: FHA and VA Loans : These are loans that are insured or backed up by the federal government.
- FHA mortgage: A Federal Housing Administration (FHA) loan is insured by the FHA and is available to homebuyers who may not have a large amount saved and are looking to pay a lower down payment. According to Investopedia, “in order to secure the guarantee of the FHA, borrows that qualify for an FHA are also required to purchase mortgage insurance, premium payments are made to FHA”. (Source: Investopedia)
- VA mortgage: A loan that provides low-interest and low down payment mortgages available for active U.S military members, veterans, and their families. These loans are guaranteed by the U.S. Department of Veterans Affairs.
- Future Home Loans is veteran owned and operated with not only Loan Officers with military backgrounds but also continued service in giving back to our fellow veterans. Future Home Loans is always focused on empowering veterans by $0 down payments for them and their families.*
- USDA mortgage: A United States Department of Agriculture offers home loans for people looking to purchase a home in a designated rural or unique area who also have a lower income. This is only offered and available in specific areas of the state and country.
- Jumbo mortgage: This type of mortgage is used to purchase properties that are higher than the maximum amount for a conventional conforming loan. According to NerdWallet, this amount in most counties is $548,250. (Source:NerdWallet). These loans can’t be guaranteed by Fannie and Freddie so they’re riskier for lenders and if the borrower defaults the lender is not protected from the losses.
- Conventional Loan: This type of mortgage is not insured or backed by the government. This type of loan is great for borrowers who can afford to make a down payment of at least 3%, depending on their financial status and the amount that is being borrowed. (Source: NerdWallet)
- Conforming conventional loan: A conventional loan that follows the traditional guidelines set by Fannie and Freddie.
- Nonconforming conventional loan: A conventional loan that doesn’t follow the traditional guidelines set by Fannie and Freddie.
Now that you have a better understanding of some of the types of Mortgage loans that are available to you can Learn More from Future Home Loans about mortgage basics, our loan process and programs. We are your Jacksonville source for all your mortgage needs.
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