Depending on what your home ownership dreams look like, the type of mortgage loan you’ll need to secure the house of your dreams will look very different. No matter what financial situation you may be in, there’s likely a mortgage loan option that will work for you. For those who are ready to claim homeownership in 2023, here are eight mortgage loan options that you simply must know about.
Any type of mortgage loan that’s not backed by the US government is defined as a conventional mortgage loan. These are incredibly common loans but are typically reserved for those with a credit score of 620 or higher. Those with a small DTI are also much more likely to be approved for a conventional mortgage loan. If you’re looking to figure out which type of home loan you need, hiring a mortgage broker to help you navigate the waters ahead is highly recommended.
If you’re looking to purchase a quality home in a designated rural area of the US, then USDA mortgage loans have you covered. These loans do not require down payments, and you will not need to purchase mortgage insurance for USDA mortgage loans either. For these two reasons, USDA mortgage loans are the best option for those who want to live in a rural area.
If you’ve had trouble with your credit history in the past, and have a limited amount of income to spend on a down payment, then you’ll benefit most from an FHA mortgage loan. These loans are available to those with a credit score of 580 or higher but also require a 10% down payment to secure in most cases. Currently, the federal government often limits FHA loans to less than one million dollars as well, so those looking to buy luxury homes will need to go another route instead.
Few loan types on this list are as value-packed and sought after as VA-backed mortgage loans. Many people join the military simply to unlock this benefit post-service. The fact that they do not require a down payment, have low-interest rates, and do not include many of the application fees associated with other loans makes them an ideal way to secure funding for your home. After you serve the country, you deserve a quality home to spend your life in, after all.
If you want a loan plan that will not suddenly cause you to have a financial crisis in the coming years, you want to look into a high-quality fixed-rate mortgage loan. These loan types have fixed credit rates that never change, and are typically meant to be paid back in one-to-three decades. For those who are looking to buy homes that they plan on staying in for decades to come, fixed-rate mortgage loans are incredibly attractive and value-packed.
Those who have more expendable income, and who are not worried about changing interest rates can apply for adjustable-rate mortgage loans. Unlike fixed-rate mortgage loans, adjustable-rate mortgage loans have their interest rates tied directly to the US economy. For those who are looking to buy a starter home that they will likely sell in a few years’ time, the more flexible and available nature of adjustable-rate mortgage loans will stand out. Many people use these when they are desperate to become first-time homeowners.
Although it’s similar to a conventional mortgage loan, high-balance mortgage loans are meant for those looking to borrow money that exceeds the standard conforming loan limit in their area. If you’re looking to buy a home that would normally be out of your price range, but that you’re willing to fight for, this is the loan type you’ve been looking for. That being said, high-balance mortgage loans still technically fall under the category of conforming loans since their loan limit is still within the FHFA’s upper limits.
If you want a larger conventional loan, you’ll want to check out the world of jumbo mortgage loans. While they are less common than other loan types on this list, they are incredibly valuable if you can qualify for one. Those who are looking to buy luxury homes that cost upwards of one million or more dollars typically opt for jumbo mortgage loans for this reason. Many people assume that high-balance mortgage loans are the same as jumbo mortgage loans, but this could not be further from the truth. If you’re interested in a jumbo mortgage loan in 2023, you’ll need to talk to a qualified financial advisor to get pointed in the right direction.