Here are 5 Types of Mortgage Loans

01. Conventional – Conventional loans are a type of mortgage loan that are NOT backed y the federal government.

• • Pros:
    • Can be used for a primary residence, second home, & investment properties
    • You can ask your lender to cancel PMI once you’ve reached 20 percent equity, or refinance to remove it
    • You can pay as little as 3 percent down
    • Sellers can contribute to closing costs

02. Jumbo – Jumbo loans are more common in higher-cost areas. More money means more risk for the lender, so these generally require more in-depth documentation to qualify.

• • • • Pros:
        • You can borrow more money to buy a more expensive home
        • Interest rates tend to be competitive with conventional loans

03. Adjustable Rate – Adjustable rate mortgages (ARMs) have fluctuating interest rates that can go up or down with market conditions.

• • Many ARM products have a fixed interest rate for a few years before the loan changes to a variable interest rate for the remainder of the term.
  • It is essential to read the fine print to know how much your rate can increase and how much you could wind up paying after the introductory period expires.

Interest rates tend to be competitive with conventional loans

04. Fixed Rate – Fixed-rate mortgages maintain the same interest rate over the life of your loan, which means your monthly mortgage payment always stays the same.

• • • Pros:
      • Monthly principal and interest payments stay the same throughout the life of the loan
      • Can more precisely budget other expenses month to month

05. Gov Insured – Federal Housing Administration (FHA loans), the US Department of Agriculture (USDA loans), and the US Department of Veterans Affairs (VA loans) are special loans available through government agencies.

• • • • • Pros:
          • Credit requirements are more relaxed
          • Don’t need a large down payment
          • Available to repeat and first-time buyers
          • No mortgage insurance and no down payment is required for VA loans

Interested in starting the home buying process? Click here to connect with a Sage & Cedar agent who can walk you through all your questions!

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