If you’re looking to buy a home, refinance your home, or invest in property, you likely want to get a mortgage loan. But what type of loan should you get? Here’s a guide on different mortgage loans to help you decide which is the right one for you.
When you think of a typical mortgage, you’re probably thinking of a conventional loan. Conventional loans are as close as you can get to a so-called standard mortgage. With no special eligibility requirements, nearly any lender offers a conventional loan as an option, and you can qualify with a mere 3% down and a 620 credit score. Due to their low rates and vast availability, conventional loans are probably the most popular mortgage for home buying and refinancing.
An FHA loan is a mortgage insured by the Federal Housing Administration. The FHA insurance protects lenders, permitting them to offer loans with low-interest rates, low down payments, and easier credit requirements. Due to their low rates and flexibility, FHA loans are popular with first-time home buyers and lower-credit home buyers.
Almost anyone can apply, but you’ll only qualify if you meet the following requirements.
- A 3.5% down payment, if your credit score is 580 or higher
- A 10% down payment, if your credit score is 500 to 579
- A debt-to-income ratio (DTI) of 50% or less
- Documented, steady income and employment history
- You’ll live in the home as your primary residence
- You have not had a foreclosure in the last three years
USDA loans are mortgages backed by the U.S. Department of Agriculture. They are available to homebuyers with a low-to-average income for their area. These loans also offer reduced mortgage insurance, below-market mortgage rates, and financing with no down payment.
USDA eligibility is based on the buyer and the property.
- The home must be in a qualified rural area.
- The buyer must meet USDA monthly income caps.
- The buyer must meet USDA’s ability to repay standards, including a steady job with monthly pay, FICO credit score of at least 640, and a debt-to-income ratio of 41% or less.
When financing an expensive property, you need a jumbo mortgage. Before you acquire a jumbo loan, you should be knowledgeable about financing. Since mortgages for high-priced homes aren’t standard, you’ll have to follow a different set of rules.
- Jumbo loans typically carry higher interest rates in addition to adjustable rates.
- Jumbo rates vary widely from one lender to the next.
- Consider a combination of a conforming first mortgage and a small second mortgage to help save you money.
If you’re looking to get a mortgage loan, let John Antel mortgages know. They’ll do their best to help you find the ideal option that meets your budget.
Read also: Top Struggles of First Time Property Buyers