What Mortgages Are Available?
Before you start shopping, it’s also a good idea to gain a basic understanding of the different types of home mortgages available. As you review the list, keep in mind that these categories widely overlap — for example, a lender may provide adjustable-rate FHA loans and fixed-rate jumbo mortgages. Work with your mortgage consultant to determine the best loan to fit your needs and design a custom financing solution.
The interest rate remains fixed for the life of the loan.
- Offer predictable monthly payments of principal and interest throughout the life of the loan.
- Provide protection from rising rates. No matter how high market rates go up, your interest rate stays the same.
- Generally well-suited to borrowers who plan to stay in their homes for a long period of time, have a fixed or slowly-increasing income, and have a lower tolerance for financial risk.
The interest rate adjusts periodically to reflect market conditions on pre-determined dates.
- The initial introductory period usually offers a lower rate (relative to fixed-rate mortgages), after which the rate adjusts periodically, based on a market index.
- Borrowers are protected from steep increases in rates through annual and lifetime adjustment caps.
- The initial rate can be locked in for different periods. Most lenders offer introductory periods of one, three, five, seven, or ten years. Typically, the rate readjusts annually after the introductory period.
- Because of the introductory period’s lower rate, some borrowers may be eligible for a larger loan amount with an ARM than with a fixed-rate mortgage.
- More appropriate for borrowers who may want to sell or refinance early, can afford to make larger monthly payments after the rate adjusts, or are looking to buy a home when interest rates are relatively high.
These are loans that exceed a specified size (conforming loan amounts).
- Jumbo loans on single-family homes exceed $625,500
- Rates are generally higher on jumbo loans than on smaller comparable loans.
The Federal Housing Administration (FHA) insures a wide variety of mortgages. These loans are designed to meet the needs of homebuyers with low or moderate incomes.
- Low down payment requirements
- Loan limits based on geographic locations
- Generally more liberal qualifying guidelines
- Use of gift funds for down payment and/or closing costs.
The Department of Veterans Affairs (formerly the Veterans Administration) guarantees mortgages for qualified veterans and active-duty military personnel and their spouses who are first or second-time homebuyers.
- Low or no down payment requirements
- A wide range of rate, term, and cost options
- Flexible qualifying guidelines
- Use of gift funds for closing costs
This program assists approved lenders in providing low and moderate-income households the opportunity to own adequate, modest, decent, safe and sanitary dwellings as their primary residence in eligible rural areas. Eligible applicants may build, rehabilitate, improve or relocate a dwelling in an eligible rural area. The program provides a 90% loan note guarantee to approved lenders in order to reduce the risk of extending 100% loans to eligible rural homebuyers.
- No Down Payment Required
- Competitive 30 Year Fixed Interest Rates
- Flexible Credit Guidelines
- No maximum purchase price
This program reduces the amount of federal income tax you pay, giving you more available income to qualify for a mortgage loan and assist you with house payments.
These programs are designed for borrowers with less-than-perfect credit histories, excessive debt, or previous bankruptcy, foreclosure or tax delinquency.