A mortgage solution that meets your financial situation is a must.
Below are the 3 most common loan types for a purchase.
This is a loan that is not insured by the government; the lender takes on the risk of losing money in the event the borrower defaults on the mortgage.
- More restrictive qualifying requirements
- Great interest rates
- Minimum credit score of 720
- 5% down payment
- Higher borrowing limits
- Investment or rental property
These loans are insured by the Federal Housing Administration. FHA loans were created to assist those with low credit scores.
- More flexible qualifying requirements
- Minimum credit score of 620
- NO DOWN PAYMENT
- Great interest rates
These loans are backed by the Veterans Administration and designed specifically for US Veterans and their surviving unmarried spouse.
- No down payment
- Minimum credit score 620
- Funding Fee
- Limits on how much can be borrowed
Unfortunately there is no single loan type that is always the best. It depends on:
- Your credit score history
- Down payments and closing costs
- Your Debt-To-Income Ratio
- Your LTV (Loan to Value) Ratio
Adjustable Rate Mortgage (ARM):A mortgage in which the interest rate may change over time. With an adjustable rate mortgage, the interest rate may change periodically, usually in relation to an index (such as the London Interbank Offered Rate, or LIBOR), and payments may “adjust” up or down accordingly.
Fixed Rate Mortgage:A fixed rate mortgage is one where the interest rate on your home loan remains the same throughout the duration of the loan.
Jumbo:A jumbo mortgage is a plus-size home loan weighing in at a dollar amount above what are called the conforming loan limits. A jumbo loan will typically come with more demanding requirements than a smaller, conforming mortgage. A loan is considered Jumbo if it exceeds $453,100 in most of the United States, though in the highest-cost areas loans have to go over $679,650 to reach jumbo territory.
Refinance: Mortgage Refinancing is a process in which you replace one or more existing loans or debts with a new loan, usually secured by the same assets. The most common type of refinancing is for home mortgages. The main goal of refinancing should be to lower your monthly payment, reduce your payment period and save you money!
USDA: These loans are designed to help families without adequate housing finance the purchase of a home in a rural area. Applicants may have incomes up to 115% of the area’s median income and must be able to afford mortgage payments, including insurance and applicable taxes. Credit score is also considered in the application process.
- The property being purchased must be in a rural area as defined by the USDA
- The property must be owner-occupied. Investment or vacation properties are not eligible for USDA loans.
- You must meet the income restrictions for the county the property is located in.