Making an informed decision about securing a mortgage loan is vital, as it involves understanding the available options and considering relevant factors. With a range of mortgage loan types designed to cater to diverse needs, it is essential to carefully evaluate your circumstances and goals to select the most suitable option. By taking the time to gain a broad understanding of the mortgage landscape, you can make a confident and well-informed choice that aligns perfectly with your unique situation.
At June’s Team, we are real estate experts and we can connect you with all the home-buying professionals you’ll need during the process. Don’t hesitate to reach out and ask any questions you have. We will be with you from start to finish making your home-buying experience the best you’ve ever had.
Primary Types of Mortgages
Fixed-Rate Mortgage (FRM) – With a fixed-rate mortgage, the interest rate remains constant throughout the loan’s duration. This ensures that your monthly principal and interest payments remain unchanged, providing stability. While taxes and homeowner insurance costs may fluctuate, your mortgage payment remains steady. This mortgage type is ideal for long-term homeownership, typically spanning a decade or more.
Adjustable-Rate Mortgage (ARM) – An ARM offers an initial fixed interest rate for a specific period, after which the rate adjusts periodically. These mortgages often commence with lower interest rates, resulting in lower initial monthly payments. The adjustment periods can vary, with some ARMs remaining fixed for several years before adjustments occur. ARMs are suitable when long-term fixed rates are high or if you plan to sell the property within a shorter timeframe.
Other Mortgage Loan Types
Balloon Mortgage
This mortgage involves monthly payments based on a 30-year term, with the remaining balance due in a lump sum after a specific period. It may include options to reset the interest rate and extend the due date based on specific conditions.
Conventional Conforming Loans
These loans adhere to standards set by Government Sponsored Enterprises (GSEs) like Freddie Mac or Fannie Mae, allowing lenders to sell them. Conventional loans can be fixed- or adjustable-rate and finance various property types.
Conventional Non-Conforming Loans
Unlike conforming loans, these conventional loans do not conform to GSE standards, making them less standardized. Their terms and pricing may vary based on property price or creditworthiness.
Government-Guaranteed Loans
Designed to increase homeownership accessibility, government agencies offer mortgage loan guarantees for specific populations.
FHA Loans
These loans offer low down payment options, as low as 3.5%, to eligible homebuyers. They are insured by the federal government and allow lower credit scores, though they tend to be slightly more expensive than conventional loans.
USDA Loans
Aimed at low- and moderate-income buyers, the USDA offers programs for purchasing or building homes in rural areas. These programs include options for down payment assistance.
VA Loans
Exclusively for eligible military personnel, veterans, and their spouses, VA loans provide favorable terms, often without down payment requirements or private mortgage insurance.
HUD 184 and HUD 184A Loans
The HUD 184 loan program supports American Indian and Alaska Native families, while the HUD 184A loan program assists Native Hawaiians on Hawaiian homelands. These loans offer low down payment options, flexible underwriting, and unique benefits for eligible borrowers.
Interest-Only Loans
With interest-only mortgages, homeowners initially make payments on interest only, typically for a fixed period. After this period, payments include both principal and interest. This type can be suitable if you plan to sell or refinance before the interest-only period ends.
Manufactured Home Loans
Designed for affordable housing, manufactured home loans require lower down payments and are specifically tailored to finance manufactured homes built to national safety standards.
Hard Money Loans
Hard money loans are a type of short-term financing option secured by the property itself, rather than the borrower’s creditworthiness. Hard money lenders are private individuals or companies that provide these loans based on the value of the property and its potential for profitability.
Owner Carried Loans
Owner carried loans, also known as seller financing, are a type of financing arrangement in which the seller of a property acts as the lender. Owner carried loans can benefit both parties, providing the buyer with an opportunity to acquire the property and the seller with a steady income stream from the loan payments.
More questions about mortgage loan types? June’s team is here to support you!
Choosing the right mortgage loan involves evaluating your financial circumstances, long-term plans, and personal preferences. By understanding the diverse range of mortgage options available, you can make an informed decision that aligns with your homeownership goals. Consult with a reputable mortgage professional to explore these options further and determine the best mortgage type for your specific needs. We would be pleased to recommend a trusted mortgage professional to you.
June’s Team at Keller Williams is well-established in the Northern Colorado community and serves clients in Greeley, Fort Collins, Loveland, Windsor, Eaton, and surrounding cities. We are the forerunners in Northern Colorado real estate and always have our client’s best interests at heart. Serving the residents of Northern Colorado is an honor and our love for the community is continuously growing. Two of our greatest values at June’s Team are to serve instead of sell and to never stop growing and striving to be the best. These are what set us apart from other realtors and truly creates a positive change in real estate. Contact us today to get started or give June a call on her cell phone at 970-388-3692, or at the office at 970-573-5791.