The current outstanding mortgage debt in the United States is $15.8 trillion. The largest contributor to this debt is residential homes, with a total debt of $11 trillion. This is because about 60% of American homes have a mortgage on them.
Not all mortgages are the same, though. There are several lending options available to buyers when purchasing a home. If you’re considering buying a home, then consider these types of home mortgages.
Types of Home Mortgages
There are three main categories of mortgages to consider when buying your home, basic, special assistance, and exotic loans. To decide which type is right for you, think about whether you qualify and if it makes the most financial sense.
These are the most common mortgage types and the ones that most buyers apply for when purchasing their home. Start here when considering what mortgage you should apply for.
These are basic mortgages with an interest rate that’s fixed for the life of your loan. Your monthly payment won’t change for the 10-40 life of your loan.
If your funding is tight, then an interest-only loan can provide you with the solution. For the first few years of your loan, you’re only required to pay the interest. After the interest period, you’ll pay off the loan like you would a standard mortgage.
These loans have an interest rate that fluctuates throughout the life of the loan. This can be a risk as the interest rate changes based on the current economy.
There are several mortgage and lending opportunities that help people in special circumstances. These special interest loans have additional qualification requirements.
These loans are guaranteed by the Federal Housing Administration. They’re the best type of home loan for those with troubled credit or lack savings for a down payment. There are several ways to work these loans, such as closing cost credits, so you can find the right mortgage for your financial situation.
This is the best type of mortgage loan to help military veterans buy a home. There’s no down payment requirement, and the loan is guaranteed by the Department of Veteran Affairs.
These loans help those in rural and low-income areas buy homes. To qualify, the property you intend to buy needs to qualify as a USDA eligible area, and you need to meet income requirements. They often don’t require a down payment.
These types of mortgages are not commonly used because they only apply to specific situations. The majority of home buyers will not use these types of loans.
Combo or Piggyback
This mortgage is actually two loans that combine so that you avoid paying Private Mortgage Insurance. You’ll put down less than 20% for the down payment.
If you know that you’re getting a large sum of money in the future, you could agree to this type of mortgage. You’ll pay only the interest for an agreed number of years, then pay one lump sum equal to the entire principal amount.
A jumbo loan is one that’s too large for the Federal Government to guarantee or purchase. These are typically loans over $700,000.
What Type of Mortgage Should I Get?
As you can see, there are several mortgage solutions available to home buyers. When comparing the different types of home mortgages, keep your current financial situation in mind. The best type of mortgage for you will be the one that you qualify for and will put you in the best financial situation moving forward.
Browse our other money articles for more financial tips and advice to help you reach financial freedom.