When you are thinking of buying a home, you may need to research the best mortgage loan options to finance it. So, what’s a mortgage loan? Well, like any other type of loan, a mortgage loan also involves principal and interest, and you’ll have to pay a monthly installment agreed upon by the lender.
There is nothing much distressing when you realize you cannot keep up with your mortgage loan repayment simply because you choose the wrong mortgage loan option. It’s therefore ideal for everyone to have a clear understanding of all the available types of mortgage loans.
Conventional loans are categorized as either conforming or non-conforming, and it’s mortgage loan from private lenders and has no government backing or insurance. Borrowers with stable income and good credit scores are likely to qualify for this mortgage loan option.
It’s also a good choice if looking for a mortgage loan with a less complicated application process. Additionally, you need at least a 620 credit score and a 3% down payment. The other advantage of Conventional loans is that it’s affordable compared to other mortgage loan options.
Federal Housing Administration (FHA) Loans is a mortgage alternative for those who cannot qualify for conventional loans. Because FHA Loans are issued by private lenders and insured by the Federal Housing Administration, there is a possibility that you can get a mortgage beyond your expectation. The challenge is that not all applicants get approval, and even if you do and your credit score lies between 500 and 579, you’ll still have to make a 10% down payment.
But if you have a 580+ credit score, then you’ll only need to pay up to 3.5%. The downside of this Mortgage loan option is its high cost, considering the monthly insurance premiums and upfront payments. However, it’s a great choice if your credit score isn’t perfect, but you’ve got the money for monthly mortgage payment.
Veterans Affairs (VA) Loans
This is a unique mortgage loan option for veterans and those active in the military. The VA Loans are insured by the United States Department of Veteran Affairs to help veterans, service members, and their families buy homes. Despite being guaranteed by the government, one must still fulfil all the qualifications set by the lender before they can take this mortgage loan option.
Furthermore, the lender must assess your financial statement to ascertain if you can pay the loan back in time. It’s better than other mortgage options because you don’t need a down payment, the terms are better, and the interests are lower. Before applying for a VA Mortgage loan, you must have a certificate of eligibility and serve in the military for 90 days to 2 years.
It’s a mortgage loan option initiated to enable low & middle-income people to purchase houses in rural areas. The program can give you a direct loan or guarantee a loan from private lenders. It’s a better choice for those without adequate housing or unable to afford traditional loans.
Furthermore, investors or homeowners from areas with less than 35000 residents qualify for USDA Mortgage loans. Your income shouldn’t exceed 115% of your areas’ median income; else, you do not qualify for the loan.
This is a mortgage loan with a similar principle and interest rate throughout the loan duration. The monthly payment may vary depending on insurance rates and property tax fluctuations. It’s an ideal option for many because of its predictable monthly fee, which gives you time to plan yourself. Furthermore, you can opt for this mortgage loan option if you reside in your permanent home. but if the interest rates are high, then it’s better to seek other mortgage loan options
As much as other mortgage loan options like Adjustable-Rate Mortgages, Government-Backed Loans, and Interest Only Mortgages, the options listed above are the most common ones. Therefore, you should make the right decision when choosing a loan for your mortgage.