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TYPES OF MORTGAGES

Buying a home is exciting, but financing it can feel overwhelming and complex. With the assistance of The LaToya Fowler Team, choosing among the different types of mortgage loans isn't all that painful if you know what to look for. It shouldn't go without saying that it's not one-size-fits-all and there are qualifications for each loan. Once you've nailed down a budget and reviewed your credit, you'll have a better understanding of what loans will work best for your needs and which you could potentially qualify for.


Here’s a quick review of some of the most common types of mortgages.



1. Fixed-rate Mortgages

Fixed-rate mortgages keep the same interest rate over the life of your loan, which means your monthly mortgage payment always stays the same. Fixed loans typically come in 15, 20, or 30 year terms.

15 Year Fixed-rate Term - Provide lower interest rates. Increased monthly payments compared to a 30 year Fixed Rate Mortgage. Potential to pay the loan off quicker.

20 Year Fixed-rate Term - Lower monthly payments when compared to a 15 year Fixed Rate Mortgage.

30 Year Fixed-rate Term - Lowest monthly payments when compared to a 15 to 20 year fixed rate mortgage. Most popular among buyers today. Provides flexibility in a buyer's finances. Typically provides the buyer with the advantage of purchasing a larger home (financially) when compared to a 15 year Fixed Rate Mortgage.

2. Conventional Mortgages

Conventional mortgages aren't typically insured by the Federal Government, but are regulated by either Fannie Mae or Freddie Mac. Eligibility for conventional loans varies per lender. However, the majority require a 620 FICO score. Most lenders will require either a 3% or 5% down payment. Mortgage insurance is still required for loans with a 80% LTV (loan to value). Conventional loans are typically used for buyers purchasing their second home, vacation home, or an investment property at 10% or 20% down.


3. Government Loans

Federal Housing Administration (FHA 203b) Loan

This type of loan requires 3.5% down. A buyer can qualify with at least a 580 FICO score. FHA Loans are insured by the Federal Housing Administration. Applicants are required to pay mortgage insurance for the life of the loan (unless refinanced) which only protects the lender should the buyer default on their loan. Buyers are eligible to purchase single family homes and/or up to a multi-unit home (up to 4 units/apartments).

Federal Housing Administration (FHA 203k) Loan

Very similar to the FHA 203b loan, the FHA 203k loan permits buyers the opportunity to renovate their newly purchased home. The loan includes the purchase price of the property plus the cost of renovations. Renovations must amount to at least $5000. Buyers must use a Licensed Contractor for all renovations.

Veteran's Affairs (VA) Loan

Active members of the military should be eligible after 6 months of service. Past members of the Military, National Guard, Veterans, or reservists are eligible to apply for this loan. In addition, spouses of military members who passed while on active duty, as a result of a service related death, or disability may also be eligible. VA Loans require 0% down, however, buyers are able to put additional money down if they choose to.

Before moving forward with any mortgage, carefully consider your financial situation. Review your circumstances and needs, and do your research so you know which types of mortgage loans are most likely to help you reach your goals.

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