4 Types of Mortgages

Finding your dream home is an amazing experience, but then when it comes to figuring out the mortgage and what you need going into it, the rose-tinted glasses may come off.But no fear, you don’t need rose-tinted glasses to stay optimistic about the mortgaging of your new home. There are so many different choices out there for all types of homebuyers. These different types are made to make the process as personalized and painless as possible and to make sure you are paying a proper amount.

1. Fixed-Rate Mortgages

These loans are usually made out for either 15, 20, or 30 years. The rate of interest will always stay the same through the years so that way each month you are paying the same amount.

This kind of mortgage can be great for someone who wants something fixed and easily predictable throughout the months. Of course, depending on if you pick the 15-year mortgage or the 30-year mortgage, the payment will be higher or lower. With a 15 year mortgage, the bill may be a bit higher as there is less time to fulfill the full amount.

2. Adjustable-Rate Mortgage

Compared to the fixed-rate mortgages where the interest stays the same, an adjustable mortgage will fluctuate the interest rates. The interest rates would be determined by the market conditions. Usually, the mortgage would be the same for around five years before starting to fluctuate.

This could be a good mortgage for those who don’t plan on having the property for too long as they don’t need such a steady interest rate. Adjustable rates could also be good for those who believe that interest rates may go down in the years ahead.

3. Jumbo Mortgages

This type of mortgage is based on the premise that the price of the house is more than the price of the federal loan limits. These loan limits could differ depending on the cost of the home itself, more expensive homes may have a higher loan limit than less expensive homes.

Jumbo mortgages can be good for someone who may want to buy a more expensive home and want to have a better chance to get it, however, your FICO score must reflect well. A mortgage like this could also work well with a buyer who would want to refinance the mortgage later on.

4. Conventional Mortgage

A conventional mortgage is one that is not involved or insured in federal loans. This could mean something like a conforming loan. This is where the house you are looking at falls within the federal loan bracket for that state. This can also depend on your credit score as well, needing at least a 620.

A mortgage like this would be good for someone that wants something where the borrowing costs may be lower compared to other mortgages and be used towards their primary home.

Homeownership is a big task and needs to be taken step by step. Evaluating your budget and what you expect your future income to be can be a great way to estimate what mortgage would suit you best.