Get to Know the Types of Mortgage Loans
When it comes to shopping for a loan, understanding the key terms can make the process go more smoothly and help prepare you to make a good financial decision. Get smart about the different types of loans that are available and find the one that best suits your needs.
Also known as a “conforming” loan, a conventional mortgage loan is any type of home loan that is guaranteed by a private lender or a government-sponsored enterprise like Fannie Mae. These loans are best for borrowers with good credit and an adequate down payment, which could be as little as 3% of the purchase price. Conventional loans can be either fixed rate or adjustable rate.
Fixed Rate loans gives home buyers the ability to maintain the same rate and payment throughout the life of their loan.
Adjustable-Rate loans begin with a set interest rate but once that initial period has passed, rates will vary according to market trends.
Both the Federal Housing Administration (FHA) and Department of Veterans Affairs (VA) offer guaranteed loans to help borrowers with income limitations or those who are current or former military. While they do require borrowers to meet specific terms, these loans usually have lower down payment requirements and less-restrictive qualifying guidelines. Consider checking with the FHA or Fixed Rate loans gives home buyers the ability to maintain the same rate and payment throughout the life of their loan.
VA, as well as your lender, for complete details if you think you may qualify for this type of loan.
Government-guaranteed loans can be either fixed rate or adjustable rate.
FHA loans are insured by the Federal Housing Administration and require mortgage insurance. These loans usually offer lower down payment opons and more lenient credit score requirements.
U.S. Department of Agriculture loans are offered to home buyers purchasing a home in rural developments.
The VA loan is a home-mortgage option available to American Veterans and their families. No PMI or down payment is required in order to obtain a VA loan.
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