Around 28 million Americans say they plan to buy a home sometime in the next 12 months. If you’re part of that group, it’s an exciting, but also stressful time in your life.
One way to make it easier is by making sure you fully understand what you’re getting into, especially when it comes to mortgage lending.
Fortunately, you’ve come to the right place for help.
Keep reading to learn about the different types of mortgages available to you in this quick borrower’s guide. As a result, you’ll be able to secure the funding you need to buy the home of your dreams.
1. Fixed-Rate Mortgage
Fixed-rate mortgages are popular with buyers since they have a fixed interest rate for the whole duration of the loan. Typically, you can get a fixed-rate mortgage for either a 15-year or 30-year term.
If you want to get a lower monthly payment for your new home, you’ll want to opt for a 30-year option, since the full loan amount is stretched over a longer period of time. This is also a good option if you have two mortgages while waiting for your old house to sell. This keeps your monthly payments lower while you look for someone to buy your house fast.
2. Adjustable-Rate Mortgage
Unlike a fixed-rate mortgage, an adjustable-rate mortgage has a variable interest rate throughout the duration of the loan. In some cases, this works out great for you, as your interest rate may go down over the years. However, it may also go up, causing your monthly payment to increase.
When you first get approved for an adjustable-rate mortgage, you’ll have a fixed rate for a set period of time, like 5 years, perhaps. Then, it will adjust up or down each year.
3. Jumbo Mortgage
If you’re looking to buy a home in a high-cost area, then a jumbo mortgage could be right for you. Jumbo mortgages are available when the home price exceeds federal conventional loan limits.
If you do opt for a jumbo mortgage, keep in mind that you’ll typically need a down payment of at least 10-20% and a credit score of around 700 or higher. These types of mortgage loans are available at both fixed and adjustable rates.
4. FHA Mortgage
An FHA mortgage is a loan option that’s insured by the Federal Housing Administration. They’re designed to help lower-income buyers secure the funds to purchase a home.
FHA loans require down payments as low as 3.5%. And, credit scores as low as 500 can qualify. However, keep in mind that you’ll have to pay mortgage insurance premium payments if you choose this loan option.
Consider the Different Types of Mortgages That May Work for You
Now that you’ve read through this guide to the different types of mortgages, you have a better idea of which loan option could work best for your financial situation. As a result, it will be much easier to navigate the home buying process so you can finally get the home of your dreams.
Looking for inspiration as you prepare to move into your new home? Check out our other articles today!