When you ultimately want to buy a home, you will likely need a mortgage.
However, choosing the type of mortgage you want is almost as important as choosing what type of home you want to live in.
There are so many different types of mortgages to consider, and this article is going to take a look at them.
Hopefully, it will be able to help you narrow down the types of mortgages you want and/or can qualify for.
1. Conventional Mortgage
This is the most common type of mortgage out there and most people who buy a home will do so with a simple conventional mortgage. These typically have the best rates, but often require a certain amount for a down payment, to avoid mortgage insurance.
These are offered by many different lenders, and can have a variety of different term and amortization lengths. For the average person in America, a conventional mortgage makes the most sense if you can afford to put a decent amount down.
2. FHA Mortgage
An FHA mortgage is one of the most accessible types of mortgages, as it has a lower credit score requirement and is often easier to qualify for. While the interest rates associated with FHA mortgages are generally more than with conventional mortgages, they can help more people get involved in home ownership.
However, you don’t need to be a first time buyer to take advantage of these loans. As long as you have 3.5% down payment and a credit score over 580, you will be able to qualify for these loans. While you can qualify with a lower credit score, it will require a higher down payment.
3. VA Home Loan
A VA home loan is a zero down payment loan option, but is only open to those who have served our country and are veterans. In addition to having zero down payment, this type of mortgage offers a ton of different benefits to those who can qualify for them.
One of the biggest benefits is that you don’t need to pay mortgage insurance, which will save you thousands and thousands of dollars in the long run. So if you (or your spouse) are a veteran, this is an option you should definitely consider and try to qualify for.
4. USDA Home Loan
Much like the last few mortgages we have touched on, this is a government-backed mortgage that is supported by the U.S Department of Agriculture. These are mortgages that are offered in rural areas of the country, to try and entice people to live in rural areas and not leave for the big city.
These loans require no down payment and have a very manageable mortgage insurance fee compared to conventional mortgages. Their definition of rural is quite flexible, so be sure to enquire even if the place you think you want to live is too large or too populous. However, you need over a 640 credit score to qualify for these, so be sure to get your credit in check before applying.
Of course, in addition to different kinds of loans, there are also loans that have different terms (open vs. closed or conforming vs. non-conforming). Also, some loans can be fixed rate mortgages and some can be adjustable rate, and the kind you choose is totally up to you.
Hopefully this article has helped you to understand and learn more about the different types of home loans at your disposal. They are all great options for different people, so be sure to do your own research to see which is the best option for you.