When you are setting out to buy your new home, whether it’s your first-time home purchase or you are a seasoned homeowner looking to move on to a new house, you need to decide which type of loan is best for you. We are going to review a few of the most popular mortgages available today so you can begin to evaluate for yourself on which direction you think is best for you and your family.
In no particular order…
3 Popular Types of Mortgages
Mortgage Type 1: FHA Loans
The first loan type is the FHA loan. And, what is the FHA loan? FHA stands for Federal Housing Administration. An FHA loan is an easier type of loan to secure for new homeowners because it requires lower down payments and it also allows for lower credit scores. It’s a really great way to get into a home your first time. And, while I mentioned this as a first-time homeowner loan program, it’s certainly not exclusive for that first time buyer group.
A lot of my clients have used this type of loan to buy their homes. They work in a similar fashion and process to other loans, and you will still be getting a pre-approval before you start house hunting. Also, although the loan isn’t actually coming from the government, it is a loan that is guaranteed by the government. With an FHA loan, you pay for an insurance product, known as PMI, along with the loan to cover any issues that might arise if there is a default on the payments. This last part is important to note when we start talking about the other types of loans.
Mortgage Type 2: Conventional Home Loans
The Conventional Home Loan is great for home buyers that have some equity from their current home to put into their new home purchase, or a downpayment of at least 20%. The reason is that PMI Insurance can be waived if you put down 20% on this loan type. One big difference between this loan and the FHA loan is also how the loan is guaranteed. With the FHA type of loan, the loan is guaranteed by the US government. With a Conventional loan, you might still need to carry PMI for a period of time with your loan – if you don’t put down 20%. And, the conventional loan is guaranteed by the lender and not the government.
So what are a few of the differences between the conventional loan and the FHA loan?
The conventional loan:
- Doesn’t need to be owner-occupied
- Often has larger loan amounts
- No PMI with 20% down
Mortgage Type 3: VA Loans
VA loans or Veterans Affairs loans are a fantastic way for United States veterans, service members, and select spouses to get into a new home. These types of loans are great for people that qualify and they offer fewer restrictions than the first two loan types.
Getting a VA loan doesn’t require higher incomes and this loan type doesn’t require a down payment either, which is a super benefit for those service members that qualify. Also, unlike the other two home loans we talked about earlier, the VA loan doesn’t require that you pay for mortgage insurance. This can be a good money saver for veterans, especially over time.
Which Mortgage is Best?
While this just covers 3 different types of Home Mortgage Loans, these are a few of the most popular. This can help you narrow down the direction to look in when choosing your loan. They all offer a different opportunity depending on your needs and qualifications. Your bank or mortgage specialist can help you narrow it down and select just the right one.
Time to Find Your Realtor
When you are ready to sell your current home or buy a new one, look to a top rated and experienced real estate agent. An agent that is familiar with the locations and types of properties you love in the Memphis area. Whether it’s residential or open land you’re looking for, work with a real estate professional that you can trust.
Click here to learn more about me and how I can help you with your home sale, buying parcels of land, or looking to move to a new home. My skills and education are focused on what you need for a great real estate experience. I would love to chat with you and answer any questions you might have. Contact me at (901) 828-8919 or drop me a quick note firstname.lastname@example.org. Look forward to speaking with you today!
Angie Kelley, Crye-Leike Realtors
(901) 828-8919 or (901) 840-1181