Before you venture into home buying, you should review the types of mortgage loans that are available, as there are quite a variety . Please use the information below as a guideline to help you determine which would be the best mortgage loan for you.
A study conducted by Consumer Financial Protection Bureau estimates that half of mortgage borrowers do not shop around, while 47 percent do not even compare lenders.
There are a wide range of options available in the market for the types of loans to choose from. Your decision to choose types of loan can make or break you as a loan seeker (borrower). Basic knowledge of loans available for mortgages is very essential. If you think you need a check on the types of loans available in the US market, keep reading below.
Types of loans for mortgages:
The following options are available to choose from when looking for mortgage loans in the US.
A conventional home loan is a regular type of loan available in the market. It is not insured or guaranteed by the government and can be either fixed or adjustable. It only adheres to the rules and regulations set by your financial institution.
Government insured loans
Government insured loans are of the 3 following types:
- FHA (Federal Housing Authority) mortgage Loans:
These are available to all types of borrowers and are not limited to first time buyers only. Under FHA loans, the government insures the lender, in case of defaults by borrowers. The program exclusively allows users to make down payments at only 3.5 percent (on perchance price). However, at the end of the day, you may end up paying more amounts in the mortgage than the actual price.
- VA Loans:
The department of Veteran Affairs in the US offers this program exclusively to the family members of the military service members. Like FHA programs, VA loans are also under federal government insurance. The best part of VA loans is that borrowers are eligible to receive 100 percent financing, without any down payment charges!
- USDA/RHS Loan:
These loans are designed specifically for borrowers from rural areas, and who hardly meet their minimum income requirement. This program is managed by the Rural Housing Services which is also part of the department for agriculture. Furthermore, as per law, the borrower’s income must not cross 115 percentage of the adjusted AMI.
The federal government created the Home Affordable Modification Program to aid homeowners who are a victim of defaulting. The program helps to fix your mortgage loans payments in such a way that it does not equal more than 31 percent of your monthly salary. More info. here.
Also known as Home Affordable Refinance Program, these programs were designed to help underwater homeowners with the opportunity to refinance their home mortgage at a lower interest rate.
These are some of the essential types of loans that are available in the US market for mortgages. It is recommended that you further research each program before you decide to settle into mortgaging your house or the vehicle of your dreams. More info. here.