What Type of Mortgage Loan Is Best for Me
When you are in the process of buying a home, odds are you should be shopping for mortgage loans as well. In today’s market, there is no one mortgage fits all model. Where you live, how long you plan to stay put, and other variables can make certain mortgage loans better suited to a home buyer’s situation and loan amount. Choosing wisely between them could save you a bundle on your down payment, fees, and interest. Read on for a quick overview of the different types of mortgage loan for a first time home buyer.
Conventional loans
Conventional loan is loan funded by private financial lenders meets Fannie Mae’s guidelines. Conventional mortgages are the most common type of mortgage. This is because they don’t have strict regulations on income, home type and home location qualifications like some other types of loans.
Conventional loans:
Down payments as low as 3%
Higher credit score required
If your down payment is less than 20%, you’ll typically need private mortgage insurance
Conventional loans is best for borrowers with higher credit scores
FHA loan
FHA loan is a home loan insured by the Federal Housing Administration. FHA loans are backed by the government and designed to help borrowers of more modest means buy a home.
FHA loans:
Allow for down payments as low as 3.5 percent.
Allow lower credit scores than most conventional loans.
Mortgage insurance premium payments are required.
FHA loans is best for borrowers with lower credit scores
VA loan
VA loan is mortgage backed by the Department of Veterans Affairs and are available to military service members, veterans, and their spouses.
VA loan:
No down payment required.
Upfront VA funding fee required.
No mortgage insurance.
VA loan is best for military-qualified borrowers who appreciate a low interest rate and no down payment minimum.
USDA loan
USDA home loans are mortgages backed or issued by the U.S. Department of Agriculture. USDA mortgage is for people who live in rural areas and show a financial need based on a low or modest income. With this loan, you can purchase a house with no down payment at below-market interest rates.
USDA loan:
No down payment is required on most properties.
Usually cheaper than FHA loans
Upfront fee and ongoing mortgage insurance premiums required
USDA loan is best for home buyers in eligible rural areas who have lower incomes, little money saved for a down payment.
Jumbo loan
Jumbo home loans are mortgages exceed amount limits set by Fannie Mae and Freddie Mac. Jumbo loan is for higher priced home. Jumbo loan limits vary by county and are adjusted periodically.
Jumbo loan:
Can have fixed or adjustable rates.
Often require a credit score of 700 or higher.
Usually require a down payment of 10% or more.
Jumbo loan is best for buyers of expensive homes and owners who want to refinance jumbo-size mortgages.
Bottom line
Not all mortgage products are created equal. The best way to find out what work best based on your situation is too get mortgage pre-qualification with lender. That way, you will know where do you stand with monthly payment estimation. With these information available, you then only look for home that are suit your needs and stay within your budget.
Swee Ng, Realtor and Phoenix East Valley resident specializing in win-win real estate transaction through great communication and fighting for his clients’ best interest. After all, this is more than real estates, this is about your life and your dreams.
If you are looking to buy or sell your home in Phoenix AZ and surrounding area, we hope you will consider us. Contact us today for complimentary consultation.
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