Getting a Mortgage Loan can seem difficult to comprehend. However, if research is done ahead of time, then getting a loan to buy your new home can be easier than you think….
Always research different mortgage types in order to find the best option for you and your family. Educate yourself in a matter of minutes here by learning more about the options available for first time home buyers and homeowners (who are refinancing) when choosing a mortgage lender.
Below you will find some of the most common types of mortgage loans available by national and regional lenders.
Choosing the right mortgage loan for your home is very important. There are hundreds of national and regional mortgage lenders to choose from in America, so how do you choose the right partner for such a big financial decision? Lets start first by understanding the various types of mortgage loans that are available to first-time home buyers and to existing homeowners alike.
Fixed Rate Mortgage:
A Fixed Rate Mortgage is built for home buyers who want the lower monthly payments that come from stretching out repayment over a long period of time. The fixed rate makes the payment predictable. A 30-year fixed offers flexibility to repay the loan faster by adding to monthly payments.
Refinancers and home buyers who want to build equity and pay off the loan faster might want to consider a 15-year fixed rate mortgage. Payments are predictable because the interest rate doesn’t change. Since the borrower pays interest for fewer years with this option, total interest payments are less.
Best loan type for borrowers who prefer lower monthly payments and want their interest rate to remain the same throughout the duration of the loan.
- Most popular loan type
- Interest rates never change
- Check out this year’s Best Picks for Fixed Rate Mortgage Lenders
Adjustable Rate Mortgage:
An adjustable-rate mortgage is a home loan with an initial rate that’s fixed for a specified period, then adjusts periodically. For example, a 5/1 ARM has an interest rate that is set for the first five years and then adjusts annually.
Best loan type for borrowers who don’t think they will have a mortgage for a very long time, or for those who believe that interest rates will be lower in the future for refinancing options. Check out this year’s Best Picks for Adjustable Rate Mortgage Lenders
Conventional mortgage loans are private loans that aren’t secured by a government agency and meet guidelines established by Fannie Mae and Freddie Mac. To get approval for a conventional mortgage loan, you must meet FICO score, debt-to-income ratio and loan amount requirements. A down payment of 20 percent is also typically suggested or required. Check out our Top Choice for Conventional Mortgage Loans
Cash Out Mortgage:
A cash-out refinance is a mortgage loan that satisfies your current mortgage balance and allows you to use the equity in your home for personal use. This type of loan might make sense for you if you can get a better interest rate than that of your current mortgage, you plan to shorten the term of your loan instead of refinancing for 30 years, and you plan to keep your mortgage for at least several more years.
Best loan type for borrowers that need cash by drawing equity from their home.
- Great option to fund home repairs or remodeling projects
- Can help borrowers who need cash to pay off other financial burdens or climbing debt amounts exceeding $10,000.
By definition, a reverse mortgage is a mortgage loan that’s secured over a residential property. It enables the borrower to access the equity in their property. Normally this appeals to an older demographic and doesn’t typically require monthly payments. Borrowers are still responsible for property taxes and insurance. Best loan type for borrowers that are over the age of 62.
A VA-guaranteed loan is available to all qualified veterans, some service members, reservists, National Guard members and certain surviving spouses of veterans who are deceased. Typically, no down payment and no mortgage insurance is required, although a one-time VA funding fee might apply. Instead of relying on a minimum credit score, lenders are required to review the applicant’s entire loan profile.
Best loan type for US Veterans.
- No Down Payment Required
- No Mortgage Insurance required
FHA loans are mortgages issued by an official FHA-approved lender and then insured by the Federal Housing Administration (FHA). This type of loan is specifically designed for low-moderate income borrowers/individuals. FHA loans often times require a lower minimum down payments and credit score from the borrower when compared to many other conventional loans.
Best loan type for borrowers with lower credit score and who need to put less than 20% as a down payment
- Lower Down Payments of 3.5% are available
- Credit scores as low as 500 can even qualify for an FHA loan.
Government Mortgage Relief Programs:
This new Government Mortgage Refinance Program – The Freddie Mac Enhanced Relief Refinance Program – can save Homeowners over $3,120 per year on their current mortgage payments. You can find out if you qualify in just 2-3 minutes and the benefits can apply to several different types of mortgages. Fast and Free Quotes…
So What’s Next?
- Select Your Loan Type & Compare Top Lenders:
After selecting the right type of mortgage for yourself or for your family, start by comparing the top mortgage lenders for each particular loan type that is right for your situation and financial goals. Make sure to compare quotes from at least three different lenders in order to get the best possible rates for your investment.
- Best Refinance Mortgage Lenders
- Best Fixed Rate Mortgage Lenders
- Best Reverse Mortgage Lenders
- Best Cash Out Mortgage Lenders
- Best Government Mortgage Programs
- Make Sure Your Debt & Credit Score are in Good Shape:
It is very important to improve your credit score before applying for a mortgage loan or even before refinancing your existing mortgage loan. Better credit scores will lead to better interest rates and lower monthly payments to the banks. Check your credit score here to get started!
If you have outstanding debt exceeding $10,000 from student loans, credit cards, medical bills or other personal loans, you qualify to consolidate that debt and reduce your monthly payments and overall amount owed back to the banks – this will allow you to have more money for your mortgage and also save more money moving forward. Check here to get a Free Quote on consolidating your existing debt.
- Get Pre-approved for your Mortgage Loan:
Once you have compared quotes from at least three or more mortgage lenders (from step 1 above) and confirmed that your credit score and debt are in order, get started on buying your home by getting pre-approved for your mortgage here. If you are refinancing, then get in touch with this year’s top refinance lenders like Quicken Loans, loanDepot and many more…
Best of luck in this journey and make sure to compare at least 3 or more mortgage lenders before locking into a rate and making a decision this big!