6 Types Of Mortgage Loans

Mortgage Loan 

A mortgage loan, or simply a mortgage, is a loan used by real estate buyers to raise cash to purchase real estate, or by existing property owners to generate finances for any reason while establishing a lien on the property being mortgaged.

Mortgage Loans are divided into six categories.

Conventional Mortgages

A loan that is not guaranteed by the federal government is known as a conventional loan. Borrowers with strong credit, steady work and income histories, and the capacity to put down a 3% down payment may generally qualify for a conventional loan guaranteed by Fannie Mae or Freddie Mac, two government-sponsored businesses that purchase and sell the majority of conventional mortgages in the US.

Conforming Mortgage Loans

Maximum loan restrictions imposed by the federal government apply to conforming loans. These restrictions differ depending on where you live. In some areas of the country, however, the FHFA sets a greater maximum loan limit (for example, in New York City or San Francisco).

Nonconforming Mortgage Loans

The most prevalent sort of non-conforming loan is jumbo loans. Because the loan amounts generally exceed conforming lending restrictions, they are referred to as jumbo loans. Because these loans are riskier for a lender, applicants must generally have more cash on hand, make a down payment of 10% to 20% (or more), and have excellent credit.

Government-Insured Federal Housing Administration (FHA) Loans

The credit-score criteria for FHA loans are less stringent than those for conventional loans. The FHA, on the other hand, does not lend money directly; instead, it insures loans made by FHA-approved lenders. FHA loans have one disadvantage. For the life of the loan, all borrowers pay an upfront and yearly mortgage insurance premium (MIP), which is a form of mortgage insurance that protects the lender from borrower failure.

Government-Insured Veterans Affairs (VA) Loans

The U.S. For qualifying military service members, veterans, and their spouses, the Department of Veterans Affairs (VA) guarantees home buyer loans. Borrowers can finance the whole loan amount with no down payment necessary. Other advantages include lower closing costs (which the seller may cover), better loan rates, and the elimination of PMI and MIP.

Government-Insured U.S. Department of Agriculture (USDA) Loans

USDA loans are excellent for homebuyers in suitable rural regions who have modest family incomes, little money set aside for a down payment, and who don't otherwise qualify for a conventional loan.

Fixed-Rate Mortgages

For those who expect to stay in their houses for a long time, fixed-rate loans are the ideal option. The length of your mortgage payments is a crucial component in how a lender rates your loan and determines your interest rate. Fixed-rate loans are exactly what they sound like: they have a fixed interest rate for the duration of the loan, which is generally between 10 and 30 years.

Adjustable-Rate Mortgages

Adjustable-rate mortgages (ARMs) have a fixed rate for the first 10 years, but after that, the rate changes according to market circumstances. If you can't afford to make a larger monthly mortgage payment once the rate resets, these loans might be risky. 

Don't forget to comment on which one fits you?