Types of Mortgage loans- which one is right for me?
If you are like most homebuyers, you may feel overwhelmed thinking about buying a home. There are many lending options available. Where should you start & what type of loan should you get?
The first thing you need to do is reach out and speak to a qualified, local, reputable lender. Not all loan officers and lenders are equal. Who you choose to work with on the lending side is key to a smooth and successful purchase. Ask me for some local lender recommendations! I've compiled a solid list over the years and I can point you in the right direction, as you start your home buying journey.
Types of mortgage loans vary. Each loan product is specific to the amount of money you have for the downpayment, your credit score and your debt to income ratio. Minimum downpayment options range from 0% (Rural USDA and downpayment assistance FHA loans) to 3.5/4% (FHA & conventional loans). Credit score regulations/fees associated with getting a mortgage loan have recently changed. These changes went into effect May 1, 2023. For details on how this will affect you, ask your mortgage loan officer. Your debt to income ratio shows how much of your income is going towards debt each month. The mortgage lender wants to be sure you have room in your monthly income to comfortably pay for a mortgage and keep up with your other debts.
USDA loans and downpayment assistance FHA loan products are government backed loans and have strict qualifying requirements. There are maximum debt to income ratios (your monthly debt payments vs how much you make each month after taxes), maximum family income (yearly), as well as other qualifying factors. Conventional loans are used when a buyer has higher credit scores and a 4%+ downpayment. There are pros and cons to using any time of loan product. Once you are educated in what you qualify for, you can decide what type you would like to utilize.
When you are ready to start shopping for a home, be sure and talk to a qualified loan officer to find out what type of mortgage loan is best for you. Once you know your options, this helps for a smoother start and, ultimately, a less stressful home search & purchase.