26 Feb Which Type of Mortgage Should I Choose?
Purchasing real estate consists of a series of choices — which neighborhood should we live in? How many bedrooms do we need? How many bathrooms? What style of home works for our family? But beyond the brick and mortar decisions, there is one very big choice to be made — what kind of mortgage do you need?
It’s important to note that not all mortgages are created equal, but there are six primary types of mortgages to consider. Your lender will direct you according to what will work best for you — not only based on your credit score but your loan amount and downpayment.
Conventional mortgages are good for borrowers who have good credit and stable income/employment histories. This mortgage type requires a 3% downpayment. Fannie Mae and Freddie Mac loans are conventional.
Conforming mortgage loans are based on federally-mandated loan limits, based on location and home price.
The non-conforming mortgages are risky loans for the lender, and therefore — require a higher downpayment of up to 20%, or even more depending on the situation. These loans also require borrowers to prove larger cash reserves than other loans.
Federal Housing Administration (FHA) loans are great for those who are first-time homebuyers or those who don’t qualify for a conventional loan. Generally, borrowers put down 3.5% of the purchase price.
VETERAN AFFAIRS MORTGAGE
Qualified military personnel, veterans, and their spouses may be able to finance 100% of their loan with fewer closing costs.
It goes without saying, there are more details for each of these kinds of mortgages, but these will give you a general idea. Lenders will evaluate your income and credit scores and guide you according to the best option for you and your family.
By the way — do I have a preferred lender? Yes! A good lender is just as important as your realtor! Let’s chat!