Types Of Mortgage Loans

When you’re ready to buy a home, you don’t want to let the perfect house get away because you haven’t familiarized yourself with financing options.

In fact, identifying the right type of mortgage loan before you start house hunting is an important step in making the most well-informed decision.

Different Types Of Mortgage Loans

Choosing the right mortgage loan involves a careful review of the various types of mortgage loan programs available and the features of each. The best mortgage loan for you should be flexible, affordable, as well as meets your individual needs.

Learn more about the different types of mortgage loans.

Fixed-Rate Mortgage

Gain a stable monthly payment with a fixed-rate mortgage.

This loan option provides predictability and stability. A fixed-rate mortgage also comes with flexible terms and low fees.

Depending on your credit history, you can access a fixed-rate mortgage for 10 to 30 years. Choose the time frame that fits your current and projected future earning potential.

Note that a fixed-rate mortgage locks you into an interest rate. You must refinance the loan to take advantage of lower interest rates that become available in the future.

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3% Down Mortgage

Reduce your upfront costs with a low down payment.

A 3% down mortgage makes it easier for you to achieve your dream of home ownership. You also can finalize your purchase quicker. This loan option is ideal for new or first-time home buyers with limited savings. It allows you to select a 15, 20 or 30-year term.

Because you put less money down upfront, your total loan payments could be high. Verify that you can afford the monthly payments as you save money now with a 3% down mortgage.

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FHA Loan

Even with a low credit score or no credit history, you could afford to buy a home thanks to an FHA Loan. 
Available to first-time buyers, this special type of mortgage loan is made available through the federal government.

If you qualify for an FHA loan, you gain competitive interest rates and can even ask a family member or friend to co-borrow with you. Your down payment will total only 10% if your credit score falls between 500 and 580 and could be as low as 3.5% if your credit score is above 580.

Choose flexible terms and a fixed interest rate for 15, 20, 25, or 30 years, too. Low closing costs add to the attractiveness of an FHA loan.

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Jumbo Mortgage

An extra-large home needs an extra-large mortgage.

Use a jumbo mortgage loan to afford a large home that fulfills your sophisticated desires or accommodates your growing family.

A jumbo mortgage covers loans of $484,350 to $1 million. The loan features low-interest rates and low closing costs. You have the choice to select terms of 15, 20 or 30 years.

While attractive, a jumbo mortgage requires a loan-to-value maximum of 80%. Also, ensure you can continue to afford the monthly payments as you prepare to buy your large home.

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Construction Loan

Build a customized home with assistance from a construction loan. This type of mortgage loan helps you save money as you create a brand-new house.

With a construction loan, you pay for the home construction and your mortgage in one easy payment. The result is lower fees, one-time closing costs, and less stress. Additionally, you’ll only pay interest on the loan during the construction phase and enjoy a low fixed-interest rate and flexible financing terms of 10 to 30 years.

Because construction costs can vary and may grow as the project progresses, finalize your house plans before you apply. Then make sure you can afford the monthly payments that will begin after the construction period ends.

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Renovation Loan

Whether you’re moving into a fixer-upper or the house you love needs a few minor updates, consider a renovation loan. These funds allow you to purchase and improve your house right away then pay for the renovations over time.

A renovation loan includes your home’s purchase or refinance costs and improvement costs. It covers non-structural improvements that total less than $50,000. For details on the types of improvements that are covered, talk to your lender.

Renovation loan terms can include a low fixed interest rate. Take advantage of flexible financing terms on your loan of 10 to 30 years. One-time closing costs add value to the loan and lower costs.

Carefully plan out your renovations before you apply for a renovation loan. To protect your finances, you may need to wait until this loan is repaid before applying for additional renovation funds.

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Bridge Loan

To afford a second home while you try to sell your current home, a bridge loan may be your best bet. Rather than miss out on the deal while you try to sell your existing home, use this option to purchase your dream home even if you don’t have the down payment.

Pay only interest for a manageable term of up to 12 months with a bridge loan. First, the mortgage company will appraise your current home and calculate your existing equity. You can then borrow up to 80% of the equity for a down payment on a second house. Your bridge home is paid off when you sell your current home.

To qualify, you must have adequate equity or credit and be ready to purchase a new home. You also have only 12 months to find a new house.

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Physician Mortgage

Put your profession as a doctor, dentist, pharmacist, or veterinarian to good use when you buy a house. A physician mortgage offers special terms to medical professionals.

With a physician mortgage, obtain financing of up to 100% for a single-family house or 90% for a condominium. Low closing costs and competitive interest rates are available for this 15, 20 or 30-year loan. As a bonus, make no private mortgage insurance (PMI) payments.

For details on how to qualify for a physician mortgage, talk to your lender.

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Deciding On The Right Type Of Mortgage Loan

The excitement of buying a home includes choosing a mortgage and a lender you can trust.

At Arbor Financial Credit Union, our team of lending professionals is ready to help you find the right type of mortgage loan for your needs. We offer numerous mortgage loan options for any budget and look forward to assisting you in financing your dream home.

Learn more about buying a home
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