A mortgage loan doesn’t come in a one-size-fits-all package. Different people have varying financial needs, and fortunately, a type of mortgage loan is designed to meet those diverse requirements. In this guide, we’ll explore the top mortgage loan types to help you make an informed choice.
Conventional Mortgage
Conventional mortgages are a popular pick for homebuyers. Backed by private lenders, they come in fixed-rate and adjustable-rate. Fixed-rate loans offer consistency with the same interest rate throughout the loan term. On the other hand, adjustable-rate mortgages have fluctuating interest rates, usually after an initial fixed period.
FHA Loan
For first-time homebuyers, Federal Housing Administration (FHA) loans are a boon. These loans feature low down payments and are more forgiving with credit qualifications. However, they require the borrower to pay mortgage insurance premiums (MIP).
VA Loan
Are you a veteran or active military personnel? The Department of Veterans Affairs (VA) offers VA Loans, which require no down payment and no mortgage insurance. These loans often come with lower interest rates, making homeownership more accessible for those who have served.
USDA Loan
Backed by the United States Department of Agriculture, these loans aim to encourage rural property ownership. With zero down payment and reduced mortgage insurance costs, USDA loans are ideal for those looking to settle in less densely populated areas.
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Jumbo Loan
Sometimes, the home of your dreams exceeds the conforming loan limits. For these high-value properties, jumbo loans are available. These require a larger down payment and excellent credit but enable you to finance more expensive homes.
Interest-Only Mortgage
An interest-only mortgage allows you to pay only the interest for a certain period, generally 5-10 years. After that, you’ll need to start paying the principal. Ideal for those expecting an increase in income, these loans offer flexibility but come with their share of risks.
Balloon Mortgage
With balloon mortgages, you pay low instalments for a short period, usually 5-7 years. A large lump sum payment becomes due at the end of this term. This type of loan can be risky but might suit those planning to sell or refinance before the term ends.
Bridge Loan
A bridge loan might be your best option if you’re selling a home and buying another. This short-term loan covers the gap between the selling date of your old home and the buying date of your new one. It provides convenience but comes at a higher interest rate.
