Types of Mortgages for Purchasing a Home
The world of mortgages can be overwhelming, with various options available to homebuyers. From conventional to jumbo, Federal Housing Administration (FHA) to Department of Veterans Affairs (VA), there are seven common types of mortgages used to purchase a home.
Conventional mortgages, the most common type of home loan, are funded by traditional banks, mortgage finance companies, and credit unions. They are often more difficult to qualify for than government home loans like FHA loans but typically cost less.
Jumbo mortgages, on the other hand, exceed the lending limits set by the Federal Housing Finance Agency (FHFA) and are used to buy expensive properties. Borrowers with strong finances and high credit scores usually opt for jumbo loans, which require a larger down payment.
FHA loans, insured by the Federal Housing Administration, are intended for homebuyers with low income or those unable to qualify for a conventional loan. With less stringent qualification requirements, borrowers with a credit score of at least 580 can qualify with a down payment as low as 3.5%.
VA loans, available to active-duty service members, veterans of the U.S. Armed Forces, and their spouses, offer no VA home loan limit for those with full entitlement. USDA loans, on the other hand, are intended for low- to moderate-income buyers in rural areas designated as eligible by the USDA, with no down payment or private mortgage insurance requirements.
203(k) loans, insured by the FHA, are intended for those buying a home in need of significant renovations and repairs. Finally, non-qualified mortgages (Non-QM) are designed for self-employed buyers or those in unique financial situations, offering more flexible credit and income requirements.
With these seven common types of mortgages, homebuyers have a range of options to choose from based on their financial situation and needs. Whether you’re looking for a traditional loan or something more specialized, there’s likely a mortgage option that fits your requirements.
