If you are looking to invest in a house, the time is perfect. However, many home buyers are unaware of the mortgage options that may be available to them, especially if they’re a first-time home buyer. Choosing the right mortgage for your home buying needs isn’t that difficult if you know how each one works.
The 5 Most Common Mortgages
- Conventional mortgages are often used for primary residences, investment properties, or vacation homes and are not government insured. Furthermore, there are “conforming” and “non-conforming” conventional loans. A conforming loan is a loan whose limit falls within the FHFA’s (Federal Housing Finance Agency’s) maximum limit. Non-conforming loans are loans that don’t fall under these guidelines. The most common type of non-conforming loans are “Jumbo” loans (loans above FHFA limits – see below).
- Adjustable-rate mortgages (ARM’s) offer lower initial interest rates and equate to big savings early in the loan term. ARM’s have fluctuating interest rates that increase or decrease based on housing market conditions. Many adjustable-rate mortgages offer fixed rates for a few years before changing to a variable rate for the rest of the term. Be sure to shop for an ARM that limits how much the interest rate can increase so you don’t have financial problems once the loan resets.
- Fixed-rate mortgages have predictable monthly payment amounts. In other words, your monthly payments will stay the same throughout the loan term. These mortgages are available in 15-year, 20-year, and 30-year terms. If you’re planning on living in the home for the next 7 to 10 years, having a fixed-rate mortgage ensures stability with your monthly mortgage payments.
- Government-insured mortgages are offered by the Federal Housing Administration (FHA), the US Department of Agriculture (USDA), and Veterans Affairs (VA). These mortgage loans make homeownership readily accessible to qualified borrowers. While the US Government isn’t a lender, they play a significant role in helping Americans achieve the dream of home ownership.
- Jumbo mortgages are available to individuals who need to borrow more than the government limit for standard mortgages. Basically, these are conventional mortgage loans with non-conforming loan limits, meaning that the price of the home exceeds the federal limit. Jumbo loans work for homes in higher-cost areas where the ceiling or loan limit is $822,375. These loans also require more extensive documentation in order to qualify for them.
Buying A Home in Stockton with H.O.M.E Lending
Before you move forward with any of these types of mortgages, be sure to take your current financial situation into consideration. If you need assistance in making the right choices, it helps to speak with experts. To learn more about these different types of mortgages, call H.O.M.E. Lending today at (209) 477-0262.