Today, there are different types of mortgage loans available to home buyers. It is important to know their different categories and features, so you can have the best selection as per your budget and requirements.
For your convenience, we are giving some common options or categories of mortgage loans, so you can fulfill your dream of having your own home easily.
Fixed-rate mortgage loan
As the name suggest, a fixed-rate mortgage loan has a constant interest rate for an entire repayment term. Your monthly payment with fixed interest remains the same for all the months and years. It also not changes even in long-term financing options.
Adjustable-rate mortgage loan
An adjustable-rate mortgage loan or ARM has an interest rate that keep on changing or adjusting from time to time after an initial period of remaining fixed. It is also called a hybrid ARM that starts off with an unchanging interest rate and after a certain period switch over to an adjustable rate.
Government-insured loans can be classified into following three categories:
1. FHA loans
Department of Housing and Urban Development (HUD) of the federal government manages the Federal Housing Administration (FHA) mortgage. Borrowers who have credit scores of at least 500 are qualified for an FHA loan. Down payment of 3.5 percent is required in it for a maximum financing. In case of borrower default, the government insures lender against losses.
2. USDA / RHS loans
The United States Department of Agriculture (USDA) provides a house loan to those rural residents who have a steady income lower than 115% of the adjusted area median income [AMI]. The AMI can be different from county to country.
3. VA loans
VA loan is provided to the military service members and their families by the U.S. Department of Veterans Affairs (VA). Like FHA program, federal government guarantees such types of loans. That means a lender is provided a payment by the government in case of borrower default. A borrower can have 100% financing to buy a home without any down payment.
A conventional loan is neither insured nor guaranteed by the federal government in any way. This is different from government-backed mortgages such as FHA, VA and USDA.
A conforming loan
A conforming loan is one that meets the guidelines of Freddie Mac or Fannie Mae which are the two government controlled corporations that sell as well as purchase mortgage-backed securities (MBS). In simple words they purchase loans from the lenders, and then sell them to investors through Wall Street.
A jumbo loan
This loan could exceed the conforming loan limits fixed by Freddie Mac and Fannie Mae. Here, a lender has a higher risk due to the size of a mortgage. A borrower must have excellent credit score, when compared to conforming loans. The down payments and Interest rates are also high in jumbo loans.
If you feel the need of some person who help to get a mortgage loan, you can meet mortgage loan brokers in Florida. Such brokers in a registered mortgage loan company provides you all type of guidance and help to get a loan of your choice.