Whether you’re looking for a new house or need to modify your current one, you’ll almost certainly need a loan. You’ll need to find out which one is ideal for you in order to pick the one that best meets your financial and home-ownership needs. In case you are looking for mortgage broker Truro, you can ask for fruitful help from Bridgeview Mortgage.
So, here are 7 popular types of loans and what they cover to guide you through the process.
Conventional loans are those made by financial institutions that are not guaranteed by a government entity such as the Federal Housing Administration or the U.S. Department of Veterans Affairs. Conforming and non-conforming loans are two types of conventional loans.
A conforming loan adheres to Fannie Mae and Freddie Mac’s guidelines. The maximum loan amount is the most important guideline. This amount varies based on the home’s location—a property in a high-income neighborhood, for example, may be eligible for a larger loan than one in a low-income area.
Other qualification guidelines include the debt-to-income ratio, loan-to-value ratio, and credit history of the applicant.
Non-conforming loans do not meet the requirements and restrictions established by Fannie Mae and Freddie Mac. Non-conforming loans, such as Jumbo Loans, are available if you need a loan that is greater than a conforming loan.
To acquire a secured or collateral loan, you must provide personal property as collateral. The property is handed to the lender if you default.
Depending on the value of the property you leverage, the interest rate and loan amount may differ. Higher-value property will often result in a larger loan and maybe a lower interest rate, while other considerations such as loan term and credit history will also be taken into account.
These are some types of personal property that can be used to secure a loan:
- Savings accounts and CDs
Under an unsecured loan, the size of the loan and rate of interest is determined by your income and credit history since this type of loan is not backed by collateral. Unsecured loans are also known as signature or personal loans. If you have a sterling credit, good income, and a solid payback plan, these can be a good alternative.
Open-ended loans are basically loans with a fixed-limit line of credit. This type of loan can be borrowed from again afterward they have been repaid. Credit cards are an example of open-ended loans, while HELOC or, a home equity line of credit, is another example. This is how HELOCs work: On the basis of your home’s appraised value, minus the balance owed on your mortgage, the lender approves you for a certain amount of credit. The amount acts as a credit line that you can borrow from, repay and borrow from again.
Homeowners who are renovating their homes can consider this loan option to fund the project.
Closed-ended loans are those loans that cannot be borrowed from again. Car loans, student loans, and mortgages are examples of close-ended loans. The loan amount is decreased with each payment. You will have to apply for a new loan if you want more credit. This is a common way if you need a set amount of money and nothing more.
A mortgage broker Truro can help you find lenders and seek out the best fit in terms of your interest-rate needs and financial condition.