What’s the best Type of Loan for you?

Buying a home can be overwhelming, but there are many different types of loans that are designed for a wide range of needs. Deciding on the type of mortgage early can help you decide what kind of home your can afford. Use this guide to explore your options and find the right loan for you.

Fixed Rate Mortgage

Best for: Buyers that are purchasing or refinancing their forever home.

A fixed rate mortgage is one with payments that remain the same throughout the life of the loan because the interest rate and other terms are fixed and do not change. These types of loans typically come in terms of 15 or 30 years. The benefit of this kind of this mortgage loan option is the predictability of the payments, because it allows you to better plan your future finances and your monthly expenses more precisely.

Adjustable Rate Mortgage

Best for: Buyers who know they will be relocating in the near future, or who plan on paying off the loan in a few years.

Adjustable rate mortgages (ARM) give the buyer the opportunity to take advantage of low interest rates. Unlike fixed rate mortgages, ARMs have rates that can change with the market conditions. As a result, there is a risk involved in getting this type of loan. However, with risk there can be reward, in the form of potentially saving a substantial amount of money in your first few years of homeownership.

Jumbo Mortgage

Best for: Buyers that plan on purchasing a home in a highly competitive market. Requires great credit, a high income, and a large down payment.

A Jumbo Mortgage is a loan that exceeds the limits set by the Federal Housing Finance Agency. This mortgage loan option is common for high-end homes and allow buyers to borrow money to buy a home in a higher cost area. While the financing requirements are much more strict than conventional loans, buyers can potentially take advantage of lower interest rates.

FHA Loan

Best for: Low Credit Score and Low Down Payment. The go-to loan program for buyers with weaker credit.

A Federal Housing Administration (FHA) loan is a mortgage that is insured by the FHA and issued by an FHA-approved lender (Vellum). This mortgage loan option is designed for low-to-moderate-income borrowers because it requires a lower minimum down payment and lower credit scores than many conventional loans.

VA Mortgage Loan Option

Best for: Military and Low Down Payment. No down payment loans for borrowers with a military connection.

Must meet one or more of the following requirements:

  • Served 90 consecutive days of active service during wartime
  • Served 181 days of active service during peacetime
  • Have 6 years of service in the National Guard or Reserves
  • You are the spouse of a service member who has died in the line of duty or as a result of a service-related disability

VHDA Mortgage Loan Option

Best for: First-time homebuyers and current homeowners who are thinking about buying in Areas of Economic Opportunity.

The VHDA mortgage loan option is a 30-year fixed-rate mortgage and has down payment grants or federal tax breaks available.

Requirements:

  • First-time homebuyer’s household income can’t exceed the lower program limits
  • Grant funds may only be used with eligible VHDA loans
  • Buyers must have a ratified sales contract on the home before the grant funds can be reserved
  • Eligible VHDA first mortgage much be locked prior to reserving grant funds
  • Visit VHDA's website for more information

USDA Mortgage Loan Option

Best for: Lown Down Payment and Rural 100% financing on rural properties

Types of loans

  • Single Family Housing Guaranteed Loan Program: for low to moderate income households located in eligible rural areas
  • Single Family Housing Direct Home Loans: for low and very-low-income households
  • Multi-Family Housing Direct Loans: financing for affordable multi-family rental housing for low-income, elderly, or disabled households in eligible rural areas

Requirements

  • Must be a US citizen or legal permanent resident
  • Ability to prove creditworthiness (usually a score of 640 or higher)
  • Stable and dependable income
  • History of timely mortgage payments (generally at least 12 months of no late payments or collections)
  • Adjusted household income is less than or equal to 115% of the area median income
  • Property is the borrower’s primary residence and is located in a qualified rural area
  • Additional requirements vary by state and by loan. Visit USDA’s website for more information.

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