If you are buying a house, you should know the types of mortgage there are. Many people are choosing to buy a house nowadays. After long years of economic crisis, it seems that the market is open again. Buying a house is not an easy job at all. You should consider many things, including the price. However, if you are one of them those that are considering buying a house – congratulations. It will surely provide a stable future and security in life for you and your family. However, be prepared for the high costs for monthly rates and possible problems with finding the best loan company.
For choosing the best mortgage, you should consider a few things:
- Cost of the houses in the areas you are planning to buy a house;
- Type of mortgage you could choose;
- Interest rates for every type of loan;
- Fees – in bank, agency, or loan agent;
- Down payment – you will understand this expression when talking with the agent for the first time;
- Job stability and monthly income – you cannot be a seer, but you can predict possible changes in your monthly income.
Now, when all of these questions are answered, you should start with the finding the best loan agency or bank for you. There are a few interesting types of mortgage that you can consider.
Types of mortgage that are issued by the government
There are types of mortgage that are ensured by the government. It means that they limited the highest amount of the money they can give you. On the other hand, they will limit your monthly income and provide security. There are three types of mortgage that are ensured by the government.
FHA loan
If you choose this type of mortgage, you will have government help. It means that the interest rate that is usually around 20% of monthly income could drop to 3.5%. This will extremely decrease the monthly rate. On the other hand, it could be not much attractive if you want a large house. You can choose the house that has a price not higher than $147,000.
VA loan
This is one of the special types of mortgage that only veterans can use. It does not mean that they can take literally every type of the house and loan they want. There are many limitations. For example, they must be involved in the war at least 90 days, and peacetime at least 180 days. They can choose a house that fulfills only primary needs. They also should have only primary property requirements.
USDA loan
If you have considered of moving to the country, this is a loan for you. The government prepared a loan that only families that live in rural areas can use. It is not high, and you cannot replace it for any other types of mortgage. You should also have a monthly income that supports this loan.
Non-government supported mortgages
This is types of mortgage that you can use without support, help or limitations by the government. Even though they represent a financial risk, they are better for larger houses. On the other hand, there are legal limitations and orders that protect buyers from bankruptcy.
Conforming loan
It is not one of the types of mortgage that the government does not limit or protect. On the other hand, there is a rule about the highest limitation. You cannot take a higher amount of money than you can pay it for. This is maybe the best for families so you can make family relocation fun.
Non-conforming loan
This has almost any of the limitations that the government set. However, it has lower costs, lower down payment, and better conditions. You can take it for a shorter period, too. The best is that you can buy a house that is in a high-cost area. This is the best for those who have high monthly income and want the expensive house. You can see that some agencies call this type of mortgage “jumbo” for obvious reasons.
Types of mortgages that loan agencies or banks provide
These types of mortgage presume that bank or loan agency recommend their rules. The best thing is that they love to negotiate with the client. You can set your rules or change loan conditions. On the other hand, they can change it in case that you cannot provide money as you have settled before.
Fixed rate mortgage
This is maybe one of the best types of mortgage for those who have simple and stable jobs and fixed monthly income. You can take this loan for 25-30 years, and actually, buy a lifetime house. It also has a little higher down payment, and maybe higher income fees. On the other hand, it provides you stability. If you have not planned to change the job, this is the right option for you.
Adjustable rate mortgage
Do not afraid of adjustable rate mortgage either. Even though it presumes changes during loan repayment, it includes great conditions. Bank or loan agency will be happy to offer you the best option. On the other hand, you will be able to change it if you have reasons for that. It usually depends on market conditions and changes in your monthly income. However, it means that you will have limited monthly rate. Nobody can force you to pay more than you can. This loan also has a much higher amount that you can take.
Bridge loan
This type of mortgage is one of those that connect two loans, or in this case, houses. If you already have a house but want to buy another one, you can consider this loan. It means that a bank or loan company will provide you with a loan for a new house, taking the old house under the same mortgage. After you sold the old house, you continue with repaying of the new house. Great option for those who want to change place for living. This could be one of the most popular types of mortgages, too. It depends on you which one will finally choose.
