Finding the right type of mortgage is key to buying a home. But what types are available? Use this guide to explore your options and find the right home loan for you.
A conventional loan is a loan that isn’t backed or secured by a government agency. These loans typically come in several different term options with the most popular being 15- and 30-year loans. Even though a conventional loan is not secured by the government, it can be sold to government agencies like Fannie Mae and Freddie Mac.
Think of adjustable-rate mortgages (ARMs) as the opposite of a fixed-rate mortgage. After a certain number of years, your interest rate will start to fluctuate with the market. ARMs are a good option for buyers who plan to stay in their home for only a short period of time and want to keep their monthly payment low.
First-time homebuyer loans can help eligible buyers purchase their first home. Both federal and state loan programs as well as low-down-payment conventional loans are available for new homeowners.
An investment property loan is a mortgage for the purchase of an income-producing property. That includes buying properties to generate rental income or to renovate and sell for a profit (more commonly known as house flipping).
A second home loan is a mortgage used to finance a secondary or vacation residence. It’s different from the loans used for primary residences or investment properties due to the unique risk profile it presents to lenders. This is mainly because you are not relying on your second home for everyday living.
Federal Housing Authority (FHA) loans offer lower down payment requirements and greater flexibility with credit score and income requirements. The FHA backs these loans to enable more people to qualify for mortgages and own their own homes.
The United States Department of Agriculture (USDA) also offers federally backed loans. These mortgage loans are specific to homes purchased in rural or suburban areas. Although you do not need to make a down payment, you will need a minimum credit score of 640 to qualify for a USDA mortgage loan.
The US Department of Veteran Affairs insures VA loans, which are intended for veterans, active-duty personnel, and their spouses. VA loans require no down payment, and they have minimal rates and costs. These loans carry a funding fee, but it may be waived in some cases.
If you’re a homeowner who has years of mortgage payments behind you, you’ve likely built up a significant amount of equity. With a HELOC, you can use that equity as collateral to get a line of credit for emergencies, home improvements, debt consolidation, vacations, educational or medical expenses and more.
Refinancing involves taking out a new mortgage loan to replace your existing one. When you refinance, you apply for a new home loan just as you did when you bought your house. But this time, instead of using the loan money to purchase a home, it’s used to pay off your existing mortgage balance.
If you are considering your loan options and want an expert opinion, our mortgage specialists are here to help. Let us help you find the mortgage that fits your needs! Give us a call or stop by today.