5 Types of Mortgage Loans to Consider for Your Next Home Purchase
Did you know that there are close to 80 million homeowners in the United States of America? to get your dream home, it is important that you learn about the types of mortgage loans that you have access to. These mortgage loans are the perfect way to get the financing that you need to live in the home that you’ve always pictured.
It’s an exciting time when you start exploring the real estate market in your area for the perfect home for your family. You need to know about mortgage loan interest rates and your options when it comes to the types of loans for mortgages.
The good news is that you’re in the right place to learn all about how to calculate a mortgage loan and determine which mortgage loan option is right for you. Keep reading to learn more today!
1. Conventional Mortgage
The conventional mortgage is the most common type of mortgage for homeowners in the United States. They’re an effective way to get the money that you need for financing a home. You need to be aware that there are strict regulations when it comes to your credit score if you want to secure a conventional loan.
If you’re purchasing your first home then you can get a mortgage for as little as a 3 percent down payment. You need to have a credit score above 620 in order to qualify for this mortgage option but it is perfect for those that want to stop renting and live in a place of their own.
There are a number of benefits of going with conventional mortgages when it comes to the different types of mortgages. The borrowing cost is often much lower when compared to other types of loans for mortgages, and you can get your home for minimal money down.
The major drawback to this FHA home loan is that you’ll need to pay private mortgage insurance if you put less than 20 percent down on the home. They’re a great option if you have a strong credit score and steady income.
2. Fixed-Rate Mortgages
Fixed-rate mortgages are great if you’re someone that enjoys the peace of mind that comes to a budget and set payment amounts. These loans feature an interest rate and payment that stays the same throughout the term of your mortgage. These mortgage loan interest rates mean that you can get an idea of what you’ll pay each month for your mortgage payments.
If you’re looking to purchase your “forever home” then you should look at getting a fixed-rate mortgage. You’ll have an easy time creating a monthly budget and saving as much money as possible for future investments or endeavors.
One thing to keep an eye out for with fixed-rate mortgages is the mortgage loan rates at the time of looking at buying a home. If the interest rates are high then you could get stuck with a high interest rate that leads to paying thousands of dollars more over the term of your mortgage.
The main benefit of fixed-rate mortgages is the ability to predict how much you’ll owe each month when you’re paying your bills. The biggest drawback is the risk of higher interest rates that could lead to paying more money.
3. Adjustable-Rate Mortgages
Adjustable-rate mortgages are similar to fixed-rate mortgages in every way except that the interest rates fluctuate based on economic factors over the term of your mortgage. You’ll agree to pay an introductory rate for the first handful of years during your loan where the interest rate is fixed.
After the introductory phase comes to an end you’ll face interest rates that change depending on the market. If these rates go down then your interest rates and your payments each month will go down. There is also a risk that the interest rates could go up during the term of your mortgage.
You need to keep in mind that there are caps on how much your interest rate can change with your mortgage over a period of time. If you’re looking for a starter home then you should consider going with an adjustable-rate mortgage. They’re perfect for someone that is looking to purchase a home that isn’t their “forever home”.
4. Government-Backed Loans
Another option at your disposal is going with government-backed loans for your mortgage loans. There are loans available for FHA loans, veterans of the United States Armed Forces, as well as mortgage loans through the Department of Agriculture.
The FHA loans are great because they require only a 3.5 percent down payment and a credit score of 580 or higher. If you’re worried that your credit score will keep you from getting a home then consider getting these types of loans for mortgages.
You can also get a USDA loan if you’re looking to purchase a home in a rural or suburban area. You won’t need to put money down in order to call one of these homes your own.
VA loans are also a great way to purchase a home for you and your family if you served in the U.S. military because they don’t require a down payment. There are certain requirements that you need to meet but it is a great way to finance a home.
5. Jumbo Loans
Jumbo loans are a type of mortgage loan that provides more money than the loan standards in your area. You can get millions of dollars to finance your dream home if you pursue a jumbo loan, depending on where you live.
These loans feature interest rates that are in the same neighborhood as conventional mortgage loans. These types of loans for mortgages are difficult to qualify for as you’ll need a credit score of 700 or higher and a low debt-to-income ratio.
Now You Know the Types of Mortgage Loans
Getting one of these types of mortgage loans is a great way to secure the money to purchase your dream home. If you found your forever home then you should look at going with fixed-rate mortgage loans, while adjustable-rate mortgages are perfect for a starter home. If you want to get your dream mansion and you have great credit then look into jumbo mortgage loans for your needs.
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