Finding the right home is an exciting experience. Finding the right mortgage, however? Not so much. There are several types of home loans available to you, but figuring out which one is best for you can be difficult. That’s why we’ve laid out everything you need to know about each type of mortgage available.
A conventional loan or mortgage is a type of home loan that is not insured by the federal government in any way. There are two main types of conventional loans: conforming and non-conforming. Conforming loans are loans that fall within the maximum limits set by Fannie Mae and Freddie Mac, while non-conforming loans are ones that exceed the maximum limits. A jumbo loan is the most common type of non-conforming, conventional loan.
As opposed to conventional loans, a government-insured loan is one that is insured by the federal government. There are three main types:
The Federal Housing Administration (FHA) mortgage insurance program offers loans where you can put down as little as 3.5% of the purchase price. However, you will have to pay for mortgage insurance, which will increase your monthly payments.
These loans are offered to members of the military and their families. They provide flexible, low-interest mortgages without having to put in a down payment or PMI. There is a funding fee, though, that can either be rolled into the loan or paid upfront.
This type of loan is offered by the United States Department of Agriculture (USDA) and it’s meant for rural borrowers who have a “steady, low or modest income, and yet are unable to obtain adequate housing through conventional financing.” You can learn more about eligibility here.
Fixed Rate Loans
A fixed rate loan is a type of loan that keeps the same interest rate over the years, meaning your mortgage payments will stay the same. While great for planning your monthly budget, you’ll generally be paying more in interest over the long term.
Adjustable Rate Loans
Adjustable rate loans, on the other hand, have fluctuating interest rates that change depending on market conditions. While you are subject to the market’s whims, you’ll still, in general, be paying less in the long-run than with a fixed rate loan.
Still have questions about home loans? Then feel free to contact Dan Senecal. As a real estate broker based in Montana, he’ll not only be able to help you learn more about home loans, but he can also help you find the home of your dreams.