Purchasing a home is an exciting decision but can be overwhelming when it comes to the financing side. Once you have set your budget and the amount of down payment, and have assessed your credit, you will then have a better understanding of what loan suits best for your needs.
Here are some of the common types of home loans.
Check home loan eligibility.
Jumbo mortgages are typical mortgage types wherein home prices can exceed the federal loan limit. This loan generally requires more papers to be eligible and is widely used in higher-cost areas.
They are more common to buyers who intend to buy an expensive home. Borrowers must have a high income, have an excellent credit score, and a substantial down payment. Most reputable lenders can offer a competitive rate for jumbo loans. A jumbo loan is solely determined by how much financing you will be needing and not by the property price.
A conventional mortgage is a non-insured type of home loan that can be conforming or non-conforming. A conforming loan means that you have reached the maximum limit of loanable amount mandated by the Federal Housing Finance Agency. Non-conforming loans are the one that does not meet the said guidelines. Generally, lenders may require you to get private mortgage insurance when you pay less than 20 percent of the stated price of the home.
Conventional loans are typically ideal for borrowers with stable income, good employment history, strong credit, and can give at least a 3 percent down payment.
Fixed-rate mortgages hold the same interest rate throughout the life of your loan. This simply means that you will be having the same monthly mortgage payment for the terms. Fixed loans are usually offered with terms of 15, 20, or 30 years.
This applies to those who plan to use the home for at least 7 years to 10 years to avail of the fixed monthly payment.
The total opposite of fixed-rate loans, adjustable-rate mortgages come with a fluctuating interest rate that may tag along with the market condition. Many Adjustable-rate mortgage products start with a fixed interest rate for several years before the loan finally switched to a variable interest rate for the remaining terms.
Government-insured home loan
Government-insured loans are mostly availed by those who have limited cash savings or have low credit profiles and may not be granted a conventional loan. This type of loan tends to offer the most flexible payment terms.
Carefully assess your financial stability and capability before deciding to take that home loan. Review your needs and circumstances, and do your own research so you would know which types of mortgage loans best suit your situation.