Do you know what type of Mortgage you qualify for?
Mortgage types explained
FHA Loan – Can be as little as 3.5% Downpayment
An FHA loan supports buyers who have a low downpayment. The Federal Housing Administration, a subsidiary of the US Department of Housing and Urban Development insures the balance of your down payment, allowing you to purchase a home without having the standard 20% required by the Lender. A buyer with a lower credit score can also make use of the FHA loan
VA Home Loan – up to 100% Financing
The Department of Veteran Affairs offer a guaranteed Home Mortgage to eligible Veterans allowing them the option to purchase a home with little or no downpayment and sometimes even with a lower credit score. This is a great opportunity to get 100% financing with no monthly mortgage insurance premiums added to the monthly payment.
Conventional Home Loan – Downpayment required
A conventional home loan is one where the buyer would have a 20% downpayment (can be less with PMI), a good credit score, a certain monthly income and the buyer would generally have closing costs to bring to the table.
These loans can be fixed rate mortgages or adjustable rate mortgages.
USDA Home Loan – 100% Financing
A USDA Home Loan is used for “rural” properties. However, those properties can also be in built up and urban areas and not necessarily out in the country. The loan can be 100% financing and the Seller can pay the closing costs. This is a great option for first time home buyers too!
PMI – Explained
Private Mortgage Insurance (PMI) option allows you to have a less than 20% downpayment on your home. It is an insurance that protects the lender should you default on the home loan payment. Private Mortgage Insurance is payable until such times as the home has reached a 20% equity value. At that point you could request the cancellation of the PMI
The Insurance Premium is included in your monthly mortgage payment.
Adjustable Rate Mortgage (ARM) and Fixed Rate Mortgage
An adjustable Rate Mortgage is one where the payment is flexible and based on the interest rate at the time. The payment would fluctuate and this can be a problem for buyers on a fixed income. ARM is normally for a 2 year period. If it did not work for you, there is an option to change over to a FRM. This would be a good option if the interest rate is high and you expect it to reduce over the two year period – you can save some money with that option if it works in your favor.
Fixed Rate Mortgage
Fixed Rate Mortgage is fixing the rate of interest on the loan. This gives you a sure figure of the monthly payment and it will not change in the fixed period. This is a good option for those are on a fixed budget.
These are the most common types of mortgages. For these and others, contact a mortgage representative and find out which option would be best for you. It is important to be pre-qualified and pre-approved for a mortgage.
We have a number of great representatives we have worked with in the past and would be glad to share their contact details with you.
Call Michael Gaddy (704) 975-4651 or email Michael@MGaddy.com