Real Estate

A Guide on the Common Types of Mortgages

In the first quarter of 2022, mortgage lenders issued about 2.71 million residential loans in the US.

Are you considering buying a home shortly? If so, you may have created a budget and a timeline to purchase. Getting mortgage loans are more accessible than most people make it out to be.

You can get pre-qualified for a taking out a mortgage in minutes, then shop for a lender to get the best mortgage loan for your home needs.

Find out what you need here with this guide to different types of mortgages.

Fixed-Rate Mortgage

It offers a set interest rate and monthly payment for the life of the loan. This type of mortgage is a good option for borrowers who want the stability of predictable monthly payments.

The interest rate on a fixed-rate mortgage may be higher than the interest rate on an ARM. The monthly price is lower than an ARM because of the locked interest rate for the life of the loan.

Adjustable-Rate Mortgage

An adjustable-rate mortgage (ARM) is a type of mortgage in which the interest rate applied on the outstanding balance varies throughout the life of the loan. Usually, the introductory rate is lower than conventional fixed-rate loans and is only for a set period. After the initial period, the interest rate on an ARM adjusts based on market conditions and the prime rate.

Federal Housing Administration Mortgage

A Federal Housing Administration Mortgage (FHA) is a mortgage insured by the federal government. This type of mortgage is often used by first-time homebuyers or those with less-than-perfect credit because it offers lower down payment and more flexible credit requirements. However, there are some drawbacks, such as the fact that you’ll pay a higher interest rate and you’ll need mortgage insurance.

Veterans Administration Mortgage

Veterans Administration (VA) loans are available to eligible veterans. VA loans are available with fixed or adjustable interest rates and offer many benefits, such as no down payment and no monthly mortgage insurance.

However, some disadvantages are also to consider, such as VA mortgages being unavailable in all states. If you are a veteran and considering buying a home, research all your mortgage options to find the best fit.

USDA Mortgage

USDA mortgages have backing from the US Department of Agriculture and are available to buyers looking to purchase a home in a rural or suburban area. These mortgages offer low-interest rates and down payment options, making them an excellent choice for qualified buyers.

Jumbo Mortgage

Jumbo mortgage loans are loans above the conventional limit. This mortgage is usually used to purchase luxury homes or investment properties. Jumbo mortgages have higher interest rates than traditional loans and often require a down payment of 20% or more.

If you are considering a jumbo mortgage, you must speak with a loan officer to see if this type of loan is right for you.

Different Types of Mortgage for Your Home Buying Process

Many different types of mortgages are available to buyers, each with its benefits and features. However, it is essential to consult a mortgage specialist to determine which type of mortgage best suits your individual needs. For more information on the different kinds of mortgages available, consult with a mortgage specialist today.

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