A breakdown of different types of mortgage and what might work best for yo A new home is, in all likelihood, the biggest purchase you’ll ever make. So it’s important to understand the tools that are available to help you make that big purchase.
Each buyer is unique, so you’ll want to do your research to understand what kind of mortgage is best for your situation.
Here’s our breakdown to help you decide.
Mortgage Requirements
There are three basic components to qualify for a mortgage. They are:
● The monthly payment that you can afford
● The amount of your down payment
● Your credit score
Where you stand on these three requirements will make a big difference in the type of mortgage that’s best for you.
Types of Mortgages
Conventional Loans
This is the most common kind of loan. A conforming loan must meet restrictions around credit score, loan size and debt.
Fixed-Rate Mortgages
A fixed-rate mortgage offers the predictability of the same payment amount each month; however, you risk locking in a high interest rate.
Adjustable-Rate Mortgages (ARM)
With an ARM, your payment amount will vary depending on current interest rate fluctuations. In most cases, you will have a fixed-rate mortgage for a set period (such as five years) before the interest rate becomes variable for the remainder of the term.
Government-Backed Loans
USDA, VA and FHA loans are backed by the government if you default. This kind of loan is less risky for lenders and makes it possible to buy a home if you don’t qualify for other types of loans.
Jumbo Loans
This type of loan goes above the standard amount for a conforming loan. To qualify, you will need a high credit score and a low debt-to-income ratio.
Balloon Mortgages
This type of mortgage allows you to make a smaller monthly payment for a set period (usually a few years), with the balance of the loan due at the end of that period.
FHA Loans
This is a type of government-backed loan which allows borrowers with lower credit scores to purchase a home.
Reach out to the real estate professional at D Realty. We can get you connected with great home loan experts and then help you find your dream home!