If you’re familiar with the terminology, choosing between the many types of mortgage loans isn’t difficult. Here’s a rundown of some of the 3 most prevalent mortgage kinds. To learn more about mortgages, get in touch with a mortgage broker Halifax.

What Are the 3 Main Types of Mortgages?

Conventional Mortgage

A conventional mortgage is a house loan that is not guaranteed by the government. Conforming and non-conforming loans are the two forms of conventional loans.

A conforming loan simply indicates that the loan amount is within the Federal Housing Finance Agency’s maximum restrictions. Non-conforming mortgage loans are those that do not follow certain rules. The most prevalent sort of non-conforming loan is Jumbo loans, which are big mortgages that exceed the FHFA restrictions for individual counties.

On many conventional loans, lenders ask you to pay private mortgage insurance (PMI) if you put down less than 20% of the purchase price.

Jumbo Loan

Conventional mortgages with non-conforming lending limitations are known as jumbo mortgages. This indicates that the home’s price is more than the federal loan limit. In most of the United States, the maximum conforming loan limit for single-family houses in 2021 is $548,250. The ceiling is $822,375 in some high-cost neighborhoods. Jumbo loans are more popular in high-cost locations and need more extensive documentation to qualify.

Government-insured Loans

Although the United States government is not a lender, it does play a role in assisting more Americans in becoming homeowners. 3 government agencies back mortgages: The U.S. Department of Agriculture (USDA loans), the Federal Housing Administration (FHA loans), and the U.S. Department of Veterans Affairs (VA loans).

USDA loans assist low- and moderate-income borrowers in purchasing homes in rural areas. To qualify, you must buy a property in a USDA-eligible location and meet certain income requirements. For qualifying borrowers with low incomes, some USDA loans may not demand a down payment.

These sorts of home loans, which are backed by the FHA, make homeownership attainable for individuals who don’t have a significant down payment or have bad credit. Borrowers must have a minimum FICO score of 580 to qualify for the FHA’s maximum of 96.5 percent financing with a 3.5 percent down payment; however, if you put down at least 10%, a score of 500 will be approved. If you put less than 10% down on a home, FHA loans demand two mortgage insurance premiums: one is paid upfront and the other is paid yearly for the life of the loan, which can raise the overall cost of your mortgage. At last, the home seller might contribute to closing expenses with an FHA loan.

For members of the United States military (active duty and veterans) and their families, VA loans offer flexible, low-interest mortgages. VA loans don’t demand a down payment or mortgage insurance, and closing expenses are usually limited and may be covered by the seller. To assist mitigate the program’s cost to taxpayers, a financing fee of a percentage of the loan amount is imposed on VA loans. Most VA loans allow this charge, as well as other closing fees, to be rolled into the loan or paid in full at closing.

The best mortgage broker in Halifax 

Before applying for a mortgage, thoroughly consider your financial situation. Examine your circumstances and requirements, as well as your study, to determine which forms of mortgage loans are most likely to assist you in achieving your objectives. In case you are looking for the best mortgage broker Halifax, you can get in touch with Bridgeview Mortgage.

Leave a Reply

Your email address will not be published. Required fields are marked *