When buying a new home, you can find several home loans on the market today, such as 15-year home loans in Massachusetts or government-funded home loans in Rhode Island. So how do you find the right loan for you when your mortgage options become overwhelming?
Perhaps you are uncertain about which type of mortgage works best for you based on your individual needs, take a moment to review the many types of home loans available below:
Conventional and Jumbo Mortgage Loans
One of the main categories of mortgage loans is known as conventional and jumbo loans. These loans are some of the most popular, as homebuyers often choose fixed-rate, adjustable-rate, or jumbo loans for their mortgages.
The main types of conventional loan and jumbo loan conductors are considered below:
Mortgage loans with fixed interest rate
Fixed-rate loans refer to loans that remain at the same interest rate for the life of the loan. These loans must follow FHLMC and FNMA guidelines and typically have a term of 30 years. You can use these loans for investment properties that have one to four units, second homes, and primary residences.
Adjustable Rate Mortgage Loans
In contrast to fixed rate loans, adjustable rate loans refer to loans in which the interest rate changes over the life of the loan. The interest rate is adjusted based on a reduction in the interest rate (buydown), the terms of the contract, indices and market rates. These traditional loans comply with the guidelines of FHLMC and FNMA. As with a fixed-rate loan, you can use this loan for investment properties that will have one to four units, second homes, and primary residences.
Jumbo Home Loans
When a property is too expensive for a conventional loan to cover, buyers can turn to jumbo loans. In most counties, the Federal Housing Finance Agency sets the maximum amount for a conventional loan at $548,250. If a home goes over that limit, a buyer can use a jumbo loan to finance it. These loans are offered with fixed and adjustable interest rates and may also include special financing.
Government Funded Mortgage Loan Programs
In addition to conventional and jumbo loans, many buyers can receive financing from various government programs. Learn more about these loans below:
Fannie Mae Mortgage Loans
Fannie Mae purchases mortgages from loan servicers to provide buyers with affordable mortgage financing. By guaranteeing and issuing mortgage-related securities, it helps with the flow of capital through the housing market.
Freddie Mac Mortgage Loans
Similar to Fannie Mae, Freddie Mac buys mortgages and then bundles them with other types of loans. Once Freddie Mac combines the loans, he can sell them to investors in the secondary mortgage market. These loans can help extend home ownership to low- and moderate-income borrowers and increase the flow of credit to various sections of the economy.
FHA Home Loans
The Federal Housing Administration (FHA) helps mortgage companies and homebuyers by insuring loans for qualified homebuyers. These FHA loans come with low down payments and flexible guidelines to make homeownership a reality for many Americans.
VA Home Loans
The Veterans Affairs (VA) department's goal is to help eligible surviving spouses, veterans, and service members become homeowners. VA loans require no down payment, have fixed or adjustable interest rates, and a flexible debt-to-income ratio. Qualified individuals can use these loans to retain, adapt, repair, or purchase homes for personal occupancy.
USDA Mortgage Loans
The United States Department of Agriculture (USDA) offers government-guaranteed loans to eligible suburban and rural homebuyers. USDA loans include below-market interest rates, have no down payment, and lower mortgage insurance premiums.
Other types of home loans
You can find several types of loans that do not belong to government programs or the most conventional options. If you're still looking for the right loans for you, check out some other popular loan options available today:
Construction loans
If you want to build a home, construction loans can help you finance it. These loans come with a 31-year term, and for the first year of the loan, buyers are only required to pay interest on the disbursed funds.
General loans
If you're looking for a new home and don't want to wait until you sell your current home, a general loan is an ideal option. These loans allow you to take advantage of your liquidity to increase your purchasing power and see yourself as someone who is going to pay in cash. With one of these loans, you will not have financing contingencies, which allows you to make an offer that stands out from the rest.
Land loans
Land loans are exceptional options for a buyer hoping to purchase a piece of land to build their home on. You can find loans with payments spread over a 20-year term and a fixed interest rate for the first five years, with rates adjusting annually thereafter.
Bridging loans
Bridge loans provide homebuyers with immediate cash flow between the time the cash is demanded and its availability. Since these loans give homebuyers a source of cash flow, they allow them to buy a new home and sell another at the same time.
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