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Different Types Of Mortgage Loans For Homebuyers

A father spends time with his daughter in play tent in the living room of his new home that he purchased after researching different types of mortgage loans.

Homebuyers have many options when it comes to mortgage loans. Whichever loan you choose should be the best fit for your specific situation. Each program has particular qualifications and requirements. This blog will explain the details of the different types of loans that most homebuyers will encounter when planning their home purchase.

FIXED-RATE LOANS

Fixed-rate mortgages have a fixed interest rate that is constant throughout the term of the mortgage. Once homebuyers lock in a rate, their rate stays the same no matter what may happen in the market.

ADJUSTABLE-RATE LOANS

Adjustable-rate mortgages are essentially the opposite of a fixed-rate mortgage. While the initial rate may be lower than the fixed-rate, it will adjust periodically over the loan term. This mortgage may be best suited for those who predict rates will decline shortly or want to sell their home before the lower-rate interval is over.

FHA LOANS

FHA loans are backed by the Federal Housing Administration and are typically easier for first-time homebuyers to qualify for because of their less strict credit score approval criteria and lower down payment requirements.

VA LOANS

Available to military members and their families, VA loans have many perks. One of the most significant perks of a VA loan is the 0% down payment criteria.

CONFORMING LOANS

A conforming mortgage “conforms” to Fannie Mae (Fannie) and Freddie Mac (Freddie) underwriting guidelines and is therefore eligible for purchase by Fannie and Freddie. Fannie and Freddie are the quasi-governmental organizations set up to create a secondary market for mortgages (outside of banks alone). The majority of all mortgages obtained in the United States are conforming.

CONVENTIONAL LOANS

Conventional loans are a favorite for homebuyers with decent credit scores and who have a fair amount of funds for a down payment. Conventional mortgages should not be confused with “Conforming Mortgages.” Conventional mortgages are institutional mortgages that are not insured by the FHA (Federal Housing Administration) or guaranteed by the VA (Veterans Administration), or the U.S. Department of Agriculture. Conventional mortgages include conforming loans, but they also have jumbo and portfolio loans. The government does not endorse these loans. However, Private Mortgage Insurance (PMI) is unnecessary if a down payment is made that is less than 20%.

JUMBO LOANS

Jumbo mortgages usually have stricter underwriting guidelines because they are not backed by Fannie Mae or Freddie Mac, but are instead held or securitized by large banks or private funds. Stricter guidelines include tighter debt ratio requirements, larger down payment, reserve requirements, and more stringent credit standards. You can purchase a primary residence, investment property, or a second home with a jumbo loan.

CONTACT OUR TEAM

This blog covers the very basics of the different types of mortgage loans that are available for homebuyers. If you would like to learn more about a loan type or get pre-approved for a purchase or refinance, contact our expert team! Our Client Advisors are available 7 days week for any questions by phone at (855) 855-4491 or by email at jvmteam@jvmlending.com. 

Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167