You’re probably looking into buying a home, if not you wouldn’t be here! It can be pretty overwhelming trying to navigate through all of your options. Not every loan works for every person, so here are five common loans for you to get an idea of what might work for you!
- Conventional mortgages
- Jumbo mortgages
- Government-insured mortgages
- Fixed-rate mortgages
- Adjustable-rate mortgages
Conventional mortgages are loans that are not government insured. Typically you will pay private mortgage insurance on conventional loans when you put down less than 20 percent of the home’s total purchase price. For these loans, you must have a debt to income ratio of 45 to 50 percent. These loans are ideal for people with strong credit and stable income. A down payment of at least 3 percent needs to be made.
When you think of jumbo mortgages, think of the word jumbo itself. It’s big. These are conventional loans for homes that exceed federal loan limits. These are more common in high-cost areas and typically more for affluent buyers.
Government-insured mortgages help you finance a home when you don’t qualify for a conventional loan and are more relaxed when it comes to credit requirements. However, more documentation is required for eligibility.
If you want to keep the same interest rate throughout the years, a fixed-rate mortgage may be right for you. These usually are in terms of 15, 20 or 30 years. That way, you can more precisely budget your other expenses. However, the fixed-rate is usually higher and it takes longer to build equity on your home. This loan is for someone planning on staying for at least 7-10 years.
Adjustable-rate mortgages are the opposite. The interest rates fluctuate with the market. In the first few years, the interest rates will be lower but could become unaffordable later on depending on your circumstances. There is a certain level of risk involved, but if you don’t plan on staying more than a few years, it could be worth the risk.
Hopefully, this gives you a bit more guidance of where you think you want to go! Do your research and find what works for you. There are many options available and even more people willing and waiting to help.
