Not all mortgages are created equal. They are crafted to meet the needs of certain homebuyers. The mortgage your brother swears is the best deal may not be the best option for you. It’s important to understand the differences in loans to ensure you are making a wise financial decision. Don’t fear, you aren’t alone; a qualified mortgage professional will be there to help answer your questions.
These mortgages are insured by the Federal Housing Administration and can be obtained at any FHA-approved lender.
They are very popular for first-time homebuyers as they have more flexible qualification requirements than the average mortgage. The typical down payment is much lower than usual at 3.5% of the home price. The loan also allows the seller, builder, and lender to pay off some of the closing costs. There is even a special product that can be added to the loan allowing the buyer to borrow extra cash to complete repairs on the home.
VA loans are for service members, veterans, and eligible surviving spouses. This program was created in 1944 to help returning service members purchase homes. Since the program began, it has helped place more than 20 million veterans and families.
These mortgages are provided by private lenders but since the VA guarantees part of the loan, the lender is able to offer better terms. There are multiple kinds of VA loans but most don’t need a down payment or require the buyer to purchase private mortgage insurance, and offer competitive rates.
USDA/RHS loans are eligible to low-income residents in rural areas. The income level cutoff varies and is determined based on the average median income in each area. They are fixed-rate, low interest loans that don’t generally require a down payment. Loans can be issued directly from USDA Rural Development or through a private institution and guaranteed by USDA Rural Development.
Funds granted through this program can be used to purchase, build, repair, renovate, or relocate a home.
To be considered, applicants must currently be without decent, sanitary housing and be unable to obtain a loan elsewhere. The type of home that can be purchased is restricted as well. Properties must be less than 2,000 square feet; below average market value; and cannot have an in-ground swimming pool.
Now that we have covered all of the most common types of mortgages, we hope you have a better understanding of which mortgage is best for you. Still unsure? Reach out to the professionals at Mortgage Specialists to discuss your options.