If you haven’t bought a home before, you may not realize that there is more than one type of mortgage. Each mortgage loan works best in a particular set of situations. Therefore, by learning about the various types, you can figure out which one best matches your needs.
Adjustable-Rate Mortgages
These feature fluctuating interest rates, at least after a few years. The interest rate will vary based on the market.
Conventional Mortgages
These are mortgage loans that do not have insurance from the federal government. If you have a down payment of under 20 percent and a conventional mortgage, expect your lender to require private mortgage insurance.
Conforming Loans
If a conventional mortgage is a conforming loan, it is less than the Federal Housing Finance Agency’s maximum limits.
Non-Conforming Loans
Non-conforming loans are those that exceed those maximum limits.
Fixed-Rate Mortgages
These maintain their interest rate. That ensures identical monthly payments.
Government-Issued Mortgages
There are three types of government-issued mortgages. The government is never the lender, but it helps the borrower become a homeowner.
FHA Loans
The Federal Housing Administration backs these. They require a FICO score of just 580 for a 3.5 percent down payment or just 500 with a 10 percent down payment. You will also need two insurance premiums.
USDA Loans
The U.S. Department of Agriculture backs these loans. They are only offered in certain rural areas and have income requirements. There is no required down payment, depending on your income.
VA Loans
The Department of Veterans Affairs backs these loans. They are for veterans and active-duty military and their families. Also, there is no required down payment.
Jumbo Mortgages
These are conventional mortgages with non-conforming loan limits. In other words, the price of the home is greater than the federal limit for a loan. These typically require more detailed documentation for you to qualify. They are obviously more common in areas with a higher cost of living.
