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5 Types of Mortgage Loans to Know

Posted by admin on January 26, 2023
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You can use more than just one kind of mortgage to finance your home. So, we’re reviewing some of the most common loans people use to buy a house. That way, you’ll be able to determine which mortgage best suits you.

 

FHA Loan

FHA loans are suitable for people with less than 20 % of the down payment and low credit scores looking to buy a home. This a loan that the Federal Housing Administration insures, and most lenders will only consider applicants with a DTI ratio of 57 % or less, a credit score minimum of 500, and a down payment of 3.5 % percent of the sales price of the home. 

 

FHA borrowers are less competitive than conventional loan borrowers during a seller’s market. Most buyers prefer buyers with a larger down payment and receive funding through a traditional loan.  

 

VA Loan 

VA loans are intended for service members who are currently active or have been on active duty for 90 days, guardsmen who served six years, and spouses of deceased military veterans.

 

Under a VA loan, you are not obligated to put down anything for a down payment. The federal government insures your loan for up to 25% of the property’s value in the event of foreclosure.

 

There is no limit on the loan amount, but the property you purchase must be your primary residence.

 

Adjustable Rate Mortgage (ARMs) 

Usually, ARMs are ideal for those who only plan to reside in a real estate property for a certain amount of years. They are also suitable for borrowers who are alright with paying a lower than-typical interest rate during the 5, 7, or 10 years of their mortgage before transitioning to an interest rate that adjusts every year or six months. 

 

There are different kinds of ARMs (5/1, 5/6, 7/1, 7/6, 10/1, and 10/6), and the one you pick determines how long you pay at a fixed rate and, later on, how often your mortgage rate changes.

 

Fixed Rate Mortgage

A fixed-rate mortgage is a loan with a fixed interest rate throughout the loan. It’s perfect for those who prefer a predictable, set monthly payment and who plan to stay at their newly purchased for an extended period of time. It can last away from 10 years to 30 years.

 

Jumbo Loan 

Very different from the other loans on this list, this option is ideal for those with excellent credit hoping to purchase an expensive property. 

 

These are for homes valued over $647,200, the limits for a GSE loan in most Georgia counties, including Richmond.

 

Most borrowers have a credit score of 700 or over, and most lenders will require a down payment of 20 percent (though some will take 10%). 

 

Jumbo loans are typically by buyers who are hoping to purchase luxurious homes. 

 

Buying a Home Can Be Tough  

That’s our list. We hope you found a loan suitable to your needs on our list. And once you do, make sure you get pre-approved before you start home searching. Buying a home can be challenging, but getting the correct type of loan for your circumstances can make it a lot easier.

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