TYPES OF HOME LOANS

TYPES OF HOME LOANS

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Your loan shouldn't be one size fits all. It should be the one size that fits you.

Searching for your dream home? Curious about different types of home loans? Ready to apply for a loan? No matter where you are on your homeowner’s journey, our seasoned professionals are standing by to share tips and strategies for your success.

Your loan shouldn't be one size fits all. It should be the one size that fits you.

Searching for your dream home? Curious about different types of home loans? Ready to apply for a loan? No matter where you are on your homeowner’s journey, our seasoned professionals are standing by to share tips and strategies for your success.

RATE OPTIONS

FIXED-RATE

A fixed-rate home loan is a loan with an interest rate that never changes. A popular term (length) for fixed-rate loans is 30 years, but many lenders offer other term options. Fixed-rate loans with shorter terms tend to require higher monthly payments, but less total interest paid over the life of the loan.

Thumbs up PROS

You lock in the security of a consistent rate, which is ideal if you plan to stay in the same home for a long time. And if rates suddenly go up, you’ll keep the rate you had the day you closed on your loan.


Thumbs down CONS

Fixed-rate home loans may have a higher rate and payment than the initial period of a loan with an adjustable rate.

ADJUSTABLE-RATE

With an adjustable-rate mortgage (ARM), your rate may change based on national rate indexes (within certain limits). Adjustable-rate home loans have an initial fixed rate period after which the rate will adjust at stated periods. For example, a “5/1 ARM” is a loan with a fixed rate for 5 years, then one yearly adjustment for the rest of the loan term. Each adjustment has annual and lifetime limits.

Thumbs up PROS

If you’re planning on staying in your home for a shorter period of time, the initial low fixed rate of a 3/1, 5/1 or 10/1 ARM can keep your monthly payments low.


Thumbs down CONS

If rates rise and you’re past your fixed period, your monthly payment could rise too. You could end up paying more each month than you did when you first obtained your loan.

LOAN TYPES

Conventional loan

CONVENTIONAL LOAN

A conventional loan isn’t insured by the federal government. They typically require a minimum of 5% down and have both fixed or adjustable rate options. Popular conventional loan terms are 15 and 30-year. The maximum loan amount for conventional loans ranges between $453,100 and $679,650 depending on the county where the property is located.

PROS

Conventional loans tend to involve less paperwork than government-backed loans in many cases. If you can make a down payment of 20% or more on a conventional loan, you won’t have to carry mortgage insurance. Also, you may not be required to establish an escrow account.

CONS

If you can’t make a down payment of 20%, it’s likely you’ll have to carry mortgage insurance, and contribute every month to an escrow account your lender will use to pay your property taxes and homeowner’s insurance.

Loan type fha loan

FHA LOAN

If you’re looking for a loan with flexible credit requirements and a more manageable down payment, an FHA Loan—backed by the Federal Housing Administration—may be just the ticket.

PROS

Government-backed FHA Loans offer competitive rates, flexible credit requirements, and down payments as low as 3.5%. An FHA Loan is a great option for people who may not qualify for a conventional loan.

CONS

Both up-front mortgage insurance and monthly mortgage insurance are required for FHA Loans, while they can be optional in other situations. You’ll also be required to have an escrow account to stay on top of your property taxes and insurance payments.

Loan type fha loan

FHA STREAMLINE LOAN

FHA Streamline Loans are a unique refinancing option for borrowers who already have an FHA loan.

PROS

Compared to many other loan types, the process of applying for an FHA Streamline refinancing is quicker and document requirements are simpler. And even if your equity is currently negative, certain types of FHA Streamline loans could still lower your payment.

CONS

Like any refinancing, there are fees involved. Also, an FHA Streamline may extend the term of your loan. The fees can offset any savings for a while, and a longer term could mean higher lifetime interest costs.

Loan type harp

HOME AFFORDABLE REFINANCE PROGRAM(HARP) LOAN

Overseen by the federal government, HARP has helped many homeowners across the country since 2010. If your current loan was sold to Fannie Mae or Freddie Mac before June 1, 2009 and you’ve remained current on your monthly payments, you may qualify for a HARP loan.

PROS

The process of getting a HARP loan is simpler and quicker than it is for many other loan types. Even if you have little or no equity in your home, a HARP loan may help lower your loan term. If you don’t have mortgage insurance on your current loan, it won’t be required on your new one.

CONS

You can only get one HARP loan per property. This means if you get a HARP loan you can’t refinance to another one later. Also, the HARP program is scheduled to end on December 31, 2018. If you think you might want to apply for one, you need to act quickly. Click here to discuss your options today.

Loan type va

VA LOAN

If you are a veteran, active duty service member, or surviving spouse of a veteran, you may be eligible for a well-deserved benefit: A VA Loan.

PROS

Compared to many other loan types, VA Loans offer low rates and manageable down payments (that can actually be as low as $0 for qualifying borrowers!) They also don't require monthly mortgage insurance payments.

CONS

New VA Loans are only for primary residences. The amount you can borrow may be limited by your VA entitlement amount. VA Loans also require an up-front funding fee, unless you have a military service-related disability.

Loan type va

VA IRRRL (INTEREST RATE REDUCTION REFINANCE LOAN)

If you have a VA Loan, an IRRRL is a great way to lower your monthly payment. However, you can only use it to refinance to a VA Loan from a VA Loan.

PROS

No credit underwriting package is required by the VA when applying, and you may not need to pay any money out of pocket or get a property appraisal. Unless you're refinancing from a VA ARM loan to a fixed rate, you can expect your interest rate to drop with a successful VA IRRRL application.

CONS

A funding fee is required, though it can be financed into the loan. If you currently have a VA ARM loan and are using an IRRRL to refinance to a fixed rate loan, your rate may go up. With a VA IRRRL, you cannot take cash out.

Loan type jumbo

JUMBO LOAN

You'd never guess, but a jumbo is a really big loan. Okay, maybe you would guess. A jumbo is a loan that exceeds conventional loan amount limits (which are currently $453,100 - $679,650, depending on the county where the property is located.

PROS

Jumbos help you buy or refinance higher-valued properties, while still offering fixed and adjustable options.

CONS

Because the sort of property bought with a jumbo loan is expensive, it can be harder to sell. A bigger down payment is sometimes needed and rates tend to be higher.