What You Need To Know About 3 Different Mortgage Options
With there being so many kinds of mortgage options available to you, it can be difficult to figure out what the differences are. Before you decide on a mortgage, be sure to know the difference between these 3 types.
An FHA loan is backed by the US government, and typically requires mortgage insurance in order to get it. Private mortgage insurance, or PMI, is a monthly premium you pay in addition to your normal mortgage payment. It protects the government in the event that you are unable to pay your loan. It's why FHA loans usually cost more than regular loans.
While this does make an FHA loan sound great, know that an FHA loan is very accessible to potential homeowners. The requirements for the down payment will be much less, at around 3.5%, and your credit score can be as low as 580. It makes an FHA loan an option if you were denied another loan due to your credit history.
With FHA loans being available in adjustable or fixed rate variations, you are still able to get the kind of loan that will work best for you.
You can be eligible for a VA loan if you are a veteran or the spouse of a deceased veteran. The main benefit of a VA loan is that it is possible to get one without a down payment, and you won't have to deal with mortgage insurance.
The main requirement of a VA loan is that you or a spouse must have served for at least 6 months. These loans are designed to get people into a home with ease after serving their country.
It's possible that you need a loan that is beyond what is allowed with a traditional loan, with each market having a limit on how much money can be borrowed for a home. In these situations, you'll need a jumbo loan to cover the mortgage. This is common for mortgages over $417,000.
To qualify for a jumbo loan, you'll need a down payment of 20% or more, and be prepared to get a loan with an adjustable rate. There are also income requirements, with the loan not exceeding 38% of your pre-tax income.
These are just a few loans that you may need to consider when getting a mortgage. For more options, consult with a local mortgage lender that can help you find the best home loans for your needs.