When you’re thinking about buying a house, getting approved for a mortgage loan is a high priority. It’s important to know that there are many types of mortgages and the one that’s best for you depends on your personal situation. Let’s look at some of the most common mortgage loans homeowners should know about.
These are the most common type of mortgages. Homebuyers with fair or better credit, a down payment, and an acceptable debt-to-income (DTI) ratio can qualify for a conventional mortgage. Borrowers can benefit from the attractive interest rate and reasonable down payment that conventional mortgages offer.
The next 4 mortgage loan options are backed by the government:
- FHA Mortgages
Insured by the Federal Housing Administration, FHA loans are more lenient on credit scores and require a smaller down payment than conventional loans. This option is good for homebuyers who may not qualify for other loan types.
- VA Mortgages
Active-duty military, veterans and (in some cases) their spouses can take advantage of a VA loan to finance their home. If you meet the requirements, you can benefit from the program by only needing a small amount down. VA loan interest rates are typically attractive, too.
- USDA Mortgages
Insured by the U.S. Department of Agriculture, this type of mortgage loan provides borrowers who meet the income requirements with a way to purchase a home with no money down. This loan type only finances properties in specific suburban and rural areas of the country.
- THDA Mortgages
The Tennessee Housing Development Agency buys loans from private lenders to promote homeownership for low-income families. Borrowers in Tennessee who meet the income thresholds can benefit from this type of loan because of its low down payment and low fixed interest rate.
Opting for a fixed-rate mortgage is helpful to borrowers who want to secure a set interest rate and payment for the life of the loan. This loan type is surprise-free and makes budgeting for the monthly mortgage payment simple.
When a homeowner wants to take advantage of lower interest rates or tap into their home’s equity, they can refinance their current mortgage loan. A mortgage refinance can change the interest rate (and the monthly payment amount along with it), decrease or stretch out the length of the loan, and “pay out” equity to borrowers who can then use it to fund various projects or expenses.
Homeowners wanting to tap into their home’s equity but uninterested in refinancing can use a second mortgage to accomplish their goals. A home equity line of credit (HELOC) is an example of a second mortgage. These loan types have an interest rate and monthly payment in addition to the original mortgage loan.
Securing a mortgage loan is an important endeavor. Trust the professionals to guide your decision. Mortgage Investors Group offers various mortgage products for residential buyers that include conventional and government loans as well as programs specifically for first-time homebuyers.