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A Complete Guide to the Types of Mortgage Loans 

A Complete Guide to the Types of Mortgage Loans

The housing market is still sizzling. What began in 2020 continues into 2022 as countless Americans are moving across the country thanks to the ability to work remotely.

Workers are fleeing expensive cities like San Francisco and New York and are flooding states like Florida, Arizona, Idaho, and Texas. 

Is that you? Are you ready to make a move to the place you actually want to live, now that you aren’t tied down to a physical office building?

Then it’s time to start researching the types of mortgage loans you can get for your new home. There’s no one-size-fits-all in 2022. There are many different loan options available.

Keep reading for help discovering the optimal mortgage loan options for you. 

Conventional Loan

Most borrowers will try to qualify for a conventional loan. They are the most popular, and in many cases, the most favorable.

They offer some of the lowest interest rates and have the most streamlined application and closing process. However, you have to fit a very specific set of requirements to qualify.

Those who have low credit scores or income, are self-employed, or lack cash for a down payment may find it hard to qualify. Down payments are 20% if you want to avoid PMI, but many people take out a conventional loan paying 5% or 10% down. 

FHA Loan

Taking out a loan for a house is much easier when you don’t need to save up tens of thousands of dollars beforehand. With an FHA loan, many people can qualify for a mortgage, even without a ton of cash on hand.

These loans allow a down payment of 3.5% down. And they also cater to first-time buyers or those with lower credit scores.

Interest rates will be higher, and you’ll need to pay monthly PMI. 

VA Loan

For qualifying service members of the military, and in some cases, the National Guard, getting a VA is one of the best things you can do.

VA mortgage loans allow for a 0% down payment and very low-interest rates. You won’t pay PMI, keeping your mortgage payment affordable. And you can likely roll much of the closing costs into the loan as well.

Physician Loan

Not all heroes fight battles. Many American heroes wear scrubs. Physicians can usually qualify for a doctor loan. These are also favorable, allowing for a 0% down payment and no PMI.

They cater to doctors who recently graduated med school. They have high DTIs but can still get a mortgage because lenders understand the circumstances of new doctors. Click here to read about doctor mortgage loans more fully. 

Non-QM Loan

If you still can’t get a loan after exhausting all of the options above, then your last chance is a non-QM loan, or a non-qualifying mortgage.

They are loans that don’t meet the standard lending rules for mortgages. They let borrowers document their income and ability to repay their loans in a different manner.

They are suited to those with unique sources of income, self-employment, or other financial complications. Interest rates are higher, but they might be your only option. 

Researching the Different Types of Mortgage Loans

Each of these types of mortgage loans offers clear benefits. But there are tradeoffs to each one. And most borrowers can typically only qualify for one or two of these loans.

Ultimately, the best loan is the one you qualify for, so you can live in your own home rather than someone else’s.

Looking for more mortgage tips? Visit our blog to keep reading. 

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