Popular Home Loan Types
Now that you have an understanding of how much you can afford to borrow to buy your dream home, it’s time to determine which mortgage products may be right for you. Here are a few popular mortgage products:
While a fixed-rate mortgage will give you a rate that never changes, an adjustable-rate mortgage will offer a rate for the initial period and then adjust to a variable rate that changes annually.
Great low rates, either for the life of the loan (fixed) or the initial term (ARM)- No mortgage insurance with 20% down
- Flexibility for young homeowners to decide what term makes the most sense for their future plans
A Jumbo Loan is a non-conforming loan used for high-value homes that are above the conforming loan limits traditionally accepted by government-sponsored enterprises. This type of loan allows a borrower with a high credit score and healthy reserves to secure a Jumbo loan.
- Loan amounts up to $2 million
- Eliminates the need for secondary financing
- Allows buyers to finance more expensive properties in counties with lower conforming loan limits
- No prepayment penalties (even on ARMs)
These mortgages are insured by the government and offer more flexible lending guidelines than conventional loans.
- Low down payment requirements
- Allows a broader range of income, debt, and credit history than conventional mortgages
- Access to streamline refinancing program
These mortgages are reserved for US service members and their spouses.
- No down payment required
- No monthly mortgage insurance payment
- Typically lower interest rates than conventional loans
- Access to VA Streamline program
FHA vs. Conventional Loans
When you’re purchasing a home for the first time, it can be difficult to understand the differences between an FHA loan and a conventional mortgage. Let’s take a closer look and compare two of the most common mortgages on the market:
An FHA loan is a mortgage insured by the Federal Housing Administration.
FHA loans are a good option for first-time borrowers who don’t have a lot of funds available for a down payment or who need a loan with more flexible income requirements.
The FHA offers flexible lending standards, and down payments as low as 3.5%, making this loan an attractive option for first-time homebuyers.
An FHA loan requires two types of mortgage insurance: an upfront fee to be paid at closing and a monthly premium. In addition, you’ll be responsible for closing costs and fees.
A conventional mortgage is a home loan that conforms to a set of guidelines set by Freddie Mac and Fannie Mae
Conventional loans are geared toward homebuyers with larger down payments and good-to-excellent credit.
These loans may have shorter approval times. In some cases, mortgage insurance isn’t required.
Down payments on conventional loans are typically 3-20%. In addition, you’ll be responsible for closing costs and fees.