Mortgage Types - Bespoke To Your Situation

Exploring the Different Types of Mortgages

When it comes to financing a home, choosing the right type of mortgage is one of the most critical decisions you’ll make. Each loan option has its own benefits, eligibility requirements, and best-use scenarios. Here’s a breakdown of the most common types of mortgages to help you decide which one might work best for you:

1. Conventional Loans

• Overview: Not insured by the government, these loans are offered by private lenders and adhere to guidelines set by Fannie Mae and Freddie Mac.

• Best For: Borrowers with good credit, stable income, and the ability to make a down payment.

• Key Features:

  • Minimum down payment: 3% to 5%.

  • Higher credit score requirements (620 or above).

  • PMI required for down payments under 20%.

2. FHA Loans

• Overview: Backed by the Federal Housing Administration, FHA loans are designed for borrowers with lower credit scores and smaller down payments.

• Best For: First-time homebuyers or those with less-than-perfect credit.

• Key Features:

  • Down payments as low as 3.5%.

  • Accepts credit scores as low as 500-580 (depending on the lender).

  • Requires upfront and annual mortgage insurance premiums (MIP).

3. VA Loans

• Overview: Exclusively for eligible veterans, active-duty military, and their families, these loans are backed by the Department of Veterans Affairs.

• Best For: Qualified military service members and veterans.

• Key Features:

  • No down payment required.

  • No PMI.

  • Flexible credit requirements.

  • Competitive interest rates.

4. USDA Loans

• Overview: Offered by the U.S. Department of Agriculture, these loans support buyers in rural and suburban areas.

• Best For: Low-to-moderate income borrowers purchasing in eligible rural areas.

• Key Features:

  • No down payment required.

  • Competitive interest rates.

  • Income limits apply.

  • Property must meet USDA eligibility guidelines.

5. Jumbo Loans

• Overview: These loans exceed the conforming loan limits set by the Federal Housing Finance Agency (FHFA).

• Best For: Buyers purchasing high-value homes or properties in expensive markets.

• Key Features:

  • Higher loan amounts (2024 limit starts at $750,000 in most areas).

  • Stricter credit and income requirements.

  • Typically requires a larger down payment.

6. Adjustable-Rate Mortgages (ARMs)

• Overview: These loans start with a fixed interest rate for an initial period (e.g., 5 or 7 years) and then adjust annually based on market rates.

• Best For: Borrowers planning to sell or refinance before the rate adjusts.

• Key Features:

  • Lower initial interest rates compared to fixed-rate loans.

  • Rate fluctuations after the initial fixed period.

7. Non-QM Mortgages

• Overview: Non-Qualified Mortgage (Non-QM) loans are tailored for borrowers with unique financial situations, such as self-employed individuals, investors, or those with non-traditional income sources.

• Best For: Entrepreneurs, freelancers, gig workers, investors and others with irregular income streams or credit profiles.

• Key Features:

  • Income verified through tax returns, bank statements, or profit and loss statements.

  • Flexible underwriting guidelines tailored to self-employed borrowers.

  • May require a higher credit score or larger down payment compared to traditional borrowers.

Which Mortgage is Right for You?

Selecting the best mortgage depends on your financial situation, long-term goals, and homeownership plans. Whether you’re a first-time buyer, a veteran, or a self-employed entrepreneur, there’s a loan option tailored to your needs.

Take the next step today:

• Schedule a free consultation to get expert advice tailored to your situation.

Ready to turn your dream of homeownership into reality? We’re here to guide you every step of the way!