CONVENTIONAL LOANS – The main difference between a conventional loan and other types of mortgages is the fact that conventional loans are not sponsored by a government entity nor are they insured by a government agency.
- Conforming loans – Conforming loans are limited to $417,000. Good FICO scores are important in securing a good interest rate. Also important for conforming loans is the LTV or Loan to Value Ratio. If a LTV is higher than 80%, lenders will require that borrowers pay for private mortgage insurance (PMI).
- Amortized Loans – The term of an amortized loan can vary from 10 years to 30 years. Essentially, a fully amortized loan is a mortgage in which the same payment is made every month with the loan being fully paid off with the last payment. There is no balloon payment.
- Adjustable-rate Loans – The interest rate of the loan can fluctuate. Typically the rate of the loan is fixed for some period (3 – 7 years) and then it becomes adjustable dependent on some other factor or index (i.e. LIBOR).
- Jumbo loans – Jumbo loans are loans in excess of $417,000 and typically have an interest rate that is .25% to .50% higher than the rate on a conforming loan. FICO scores and LTV are both important when securing a Jumbo Loan.
FHA LOANS – These loans are sponsored (and guaranteed) by the FHA. An FHA loan only requires a 3.5% down payment but it also requires mortgage insurance which is funded into the loan. The FICO scores required for an FHA loan are typically lower than those required for conventional loans. Although loan amounts are limited for FHA loans, these loans are typically great options for first-time home buyers.
VA LOANS – These loans are available to veterans who have served in the U.S. Armed Services. Requirements vary depending on the year of service and discharge status. The main benefit is that the borrower does not need a down payment. The loan is guaranteed by the Department of Veteran Affairs, but is funded by a conventional lender.
OTHER LOAN TYPES – There are many other types of loans available including Interest-Only Mortgages, Option ARM Mortgages, Combination (first and second) Mortgages, Streamlined-K Mortgages, Bridge Loans, Equity Loans and Reverse Mortgages. Please contact us if you have questions about these other loan types.
Not sure which loan is right for you? Contact us, we help you choose the right loan based on your financial needs.