Types of Home Loans
We are here to help you learn about the different types of mortgages available to you. Get in contact with us today in order to learn more about which loan types are best suited to your personal situation!
Home Loans We Offer
Conventional Loans
Conventional loans are offered by a private lender such as ourselves, and they have stricter standards than some other loan types. They are the most common type of mortgage. One advantage of conventional loans is that they are often cheaper than some other loan types. In order to qualify for a conventional mortgage, you need to complete an application. Conventional loans are classified as a conforming loan.
Jumbo Loans
Jumbo mortgages are often utilized for expensive homes which require a large loan. Big loan amounts beyond a certain threshold are considered non-conforming loans, which means they carry more financial risk for the lender. The upside to these loans is that they have a much higher possible mortgage amount than conventional loans, which gives more options to the buyer. Because jumbo loans are risky for the lender, there are very strict strict standards for buyers in areas such as credit and debt-to-income ratio. You will also need a large income and reserve cash.
Fixed Rate Loans
Fixed-rate mortgages have an interest rate that stays the same for the entire mortgage term. This is good for people who want to stay in their home long-term, and those who want predictability with home payments. You will know from the start exactly how much you will pay in interest over the course of the loan. You will likely have a higher interest rate than what an adjustable-rate mortgage starts out with, but you don't have the risk of your rate changing over time.
Adjustable Rate Loans
Adjustable rate mortgages have interest rates that change with the market, meaning they can go up and down over the course of the loan. These loans typically start off with a low initial interest rate. There is a period of time at the beginning of the loan where the rate is fixed, but that will eventually end and the mortgage will change into an adjustable rate. There is a ceiling to how high the rate can get during the entire life of the loan. Adjustable rate mortgages are less predictable and more complex than fixed rate loans.
USDA Loans
USDA Loans are government-backed loans aimed at low-income buyers in rural areas. They have more lenient standards for financial factors such as your credit that play into qualification for a loan. If you qualify for a USDA loan, you can generally get low interest rates, and you won't have to pay a down payment. We can help you find out if you are eligible for this type of loan.
VA Loans
VA loans are backed by the U.S. Department of Veterans Affairs. If you are actively serving in the military, are a veteran, or are a surviving spouse, you may qualify for a VA loan. They have no down payment, no prepayment penalties, no required private mortgage insurance, and generally lower interest rates. Credit requirements for VA loans are more relaxed than typical loans. Visit the VA Website if you think you might be eligible.
FHA Loans
FHA loans are backed by the Federal Housing Administration. These loans are designed to help lower income U.S. citizens get a loan. They have more lenient standards for loan qualification, such as a less strict credit requirement and a lower down payment. On the other hand, FHA loans require the borrower to have mortgage insurance, and they may also have to pay a higher interest rate than normal. FHA loans also have a limit on how much you can borrow. If you are a first time home buyer, this may be a good option.
Conforming VS Non-Conforming Mortgages
Conforming loans are those which fit within the guidelines set by Fannie Mae or Freddie Mac, which are government sponsored mortgage buyers in the United states. They have standards for loans they will buy. This includes having a credit score above a certain amount, a certain down payment amount, and a maximum debt-to-income ratio. Conforming loans also can’t exceed a certain amount, which varies from area to area depending on the cost of living. any loans that do not fit these qualifications are non-conforming, such as jumbo loans. Conforming loans are less risky to the lender, so they are less expensive than non-conforming loans in general.
