5 Types of Mortgages You Should Know
When you begin to research home loans, you will come across numerous different mortgage products. Some of these products can save you money, while others may not be designed for people in your particular circumstances. For that reason, it helps to know a little bit about the various types of mortgages that will be available to you. That’s where Local Mortgage can help.
In today’s article, we discuss five different types of mortgages that you should know about. This is merely meant to introduce you to these types of home loans, so if you want more information, then feel free to browse our site or contact one of our loan officers for a free consultation. Our experts will help you find the right product for you and get you into your dream home for a low monthly payment!
Conforming Home Loans
Conforming home loans are some of the most common types of mortgages issued in the market today, which makes them an excellent place to start our discussion on mortgage products. Conforming loans are a type of conventional home loan and are called “conforming” because they conform to the lending guidelines outlined by Fannie Mae and Freddie Mac, which are two entities created by the U.S. to help stabilize mortgage markets.
Most of the conforming loans issued by Local Mortgage are 30 or 15 year fixed rate loans. This means that your payment will be fixed for the life of the loan. Your payment will include Principal, Interest, Taxes and Insurance. The Principal and Interest portion of the payment will never change, but the tax and insurance portion will change over time as taxes and insurance typically change from year to year.
Conforming loans require a 5% down payment, unless you are a first time home buyer, in which case only 3% down payment is required. Mortgage Insurance will be required unless you are able to make a 20% down payment.
FHA Home Loans
Another popular type of mortgage is the FHA home loan. These loans are insured by The Federal Housing Administration (FHA), which allows lenders to make loans to homebuyers without substantial down payments. FHA loans have slightly more lenient credit requirements than Conforming loans.
FHA loans require a 3.5% down payment. There is an upfront mortgage insurance premium required at closing, which may be financed into the loan, and a monthly mortgage insurance premium included in monthly payments.
Most FHA loans are 30 or 15 year fixed rate loans.
Similar to FHA loans, VA loans are mortgages that are issued by an approved lender (such as Local Mortgage) and insured by a government entity. The U.S. Department of Veteran Affairs (VA) insures VA loans for veterans and qualified active-duty service members. Thanks to the financial backing of the VA, veterans can obtain mortgages with low interest rates and no required down payment.
USDA Home Loans
While many people who are familiar with mortgages probably know a bit about FHA and VA loans, they may not know much about USDA home loans. USDA home loans are mortgages guaranteed by the U.S. Department of Agriculture (USDA), and are designed to make rural housing more affordable. While there are generally no geographic restrictions for other loan types, USDA loans are made to homebuyers purchasing homes in eligible USDA areas.
USDA home loans typically require no down payment. They are offered for 30 year fixed rate terms at very competitive rates.
The last type of mortgage you should be aware of is the jumbo home loan. Jumbo loans are mortgages for people that need to borrow more than the limit on conforming loans, which is currently $584,250 for 2021 in most areas. Like conforming loans, jumbo loans can come in 15 and 30 year terms, and they can feature either fixed rates or adjustable rates.
Since jumbo loans exceed the maximum limits set for conforming loans, they can be a little bit more difficult to qualify for, generally requiring great credit scores and larger down payments.
Get your Home Loan from Local Mortgage
Hopefully today’s article has helped you learn more about some of the different types of mortgages available. If you would like to learn more about these mortgage products and discover which one is best for your circumstances, please contact Local Mortgage today. Our team will help you determine which type of mortgage will help you save the most money when purchasing your next home.