Many people that there is only one type of mortgage loan. Many assume that you go to a lender and ask for a mortgage loan, submit your requirements, and you’re good to go. However, there are many different types of mortgage loans to choose from.
It is best to learn as much as you can about them to have a smooth repayment term. Many borrowers in the past didn’t consider much the type of mortgage loan they took and ended up having a lot of trouble with their mortgages. Some were not even able to pay their dues, which resulted in the loans defaulting and for some, losing their own homes.
Some of the most popular types of loans are the conventional mortgage loan, FHA loan, VA loan, reverse mortgage Houston and the adjustable-rate mortgage. Here are some of the things that make each unique. It is best to learn the basics, so you know which one is the best for you before taking out one.
The conventional mortgage loan is simply the most popular type of loan because you can get approved quickly. Most of the time, the only essential requirement you need is to have a good credit score and history and a down payment of at least ten percent of the total cost of the property. It also has low-interest rates. The good thing about this type of loan is whenever you have financial difficulties in the future; you can choose to pay for interest only. However, this is not a recommended long-term solution since you will still be paying your principal, and it will only prolong the time you need to pay off your mortgage loan.
FHA mortgage loan is often associated with first-time home buyers. However, it is offered for anyone qualified. One of the best things about this type of loan is it requires a lower credit score at 580. It also requires a smaller down payment at 3.5 percent of the total cost of the house only. You need to remember though that when it comes to interest rates, it is higher than others. It is also a bit more challenging to qualify here as compared to other types of government loans.
VA loan is probably the best government-insured loan you will ever see. However, it is only limited to veterans, military personnel, and their families. If you are qualified, you can even take out a house with no down payment. And if a down payment is required, it is the lowest at three percent of the total cost of the home only.
USDA Rural Housing Loan
The USDA rural housing loan is also one of the few types of mortgages that may require no down payment. However, it is only applicable to some regions of the country. As the name implies, it is mostly in rural towns and communities. However, you can always check since there are some areas where they can be flexible when it comes to the location of the house. So, give it a try if you are interested in this type of loan.