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You’re about to start your home search! You’ve got your down payment ready, pre-approved for a mortgage, and you’re starting to look at listings.
But the question still remains — what types of mortgages are available right now?
For buyers, knowing all the different mortgage options is important. Depending on your budget and financial situation, you might need one type, but not another.
Don’t worry, we’re here to help! Below, we’ve outlined all the types of mortgage you might need to help you find your dream home.
Types of Mortgage Available Today
There are four main mortgage types available today: fixed-rate, adjustable-rate, government-backed, and jumbo. Each type has its own benefits and drawbacks, so it’s important to choose the right one for your needs.
Fixed-Rate Mortgage
A fixed-rate mortgage is a mortgage for which the interest rate does not change during the entire term of the loan. This type of mortgage is the most popular among home buyers because it offers predictability and stability. Principal and interest payments remain the same for the life of the loan, making it easier to budget for your monthly expenses.
Adjustable-Rate Mortgage
An adjustable-rate mortgage, or ARM, is a loan with an interest rate that will change during the life of the loan. An example of an adjustable-rate mortgage is a doctor’s mortgage loan.
If you are a new doctor who is not qualified for a conventional mortgage, you may use a doctor mortgage loan to buy a house. These doctor mortgage loans are ARMs wherein the initial interest rate is usually lower than a fixed-rate mortgage. The interest rate can go up or down, depending on market conditions.
Check out this article on doctor mortgage loans for more info.
Government-Backed Mortgage
Government-backed mortgages, by the name itself, are backed by the federal government and have special privileges, such as lower interest rates. However, they also come with strict requirements, such as income limits. There are a few different types of government-backed mortgages available today.
The most common are FHA loans, VA loans, and USDA loans.
FHA loans are available to borrowers with a credit score of 580 or higher. VA loans are available to active-duty military members, veterans, and their families. USDA loans are available to rural homeowners with an income below a certain threshold.
Jumbo Mortgage
A jumbo mortgage is a loan for more than the standard loan limit. These home loans typically have higher interest rates and stricter requirements, but they can be a good option for high-end homes.
There are two types of jumbo mortgages available today, fixed-rate and adjustable-rate.
Fixed-rate jumbo mortgages have interest rates that remain the same for the life of the loan, while adjustable-rate jumbo mortgages have interest rates that can change, resulting in a lower monthly payment. Both types of jumbo mortgages are available with either a 15- or 30-year term.
Understanding Mortgage Options
The mortgage process can be daunting, but understanding these can help make the process simpler. Get in touch with a mortgage loan originator today to explore the different types of mortgage available and find the best option for you.
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