A wide range of mortgage products are available to cater to different needs of homebuyers. Though some are more common and available at most lenders, others are not so common and can only be useful in special cases. Depending on the nature of these mortgage types, they have been classified into some groups for easier comparison.
Mortgage Classification and Comparison
While a government loan may be easier to qualify, a conventional loan may offer you more benefit. Depending on the loan amount, the mortgage can be either conforming or non-conforming. A borrower may sometimes need a second mortgage to pay for the cost of obtaining a first mortgage. A fixed-rate mortgage protects you from a rise in interest rate whereas an adjustable-rate mortgage may be a good option to begin homeownership.
Some mortgage options are more common than the others, and are thus popular with the home buyers. Fixed-rate mortgages, adjustable-rate mortgages and FHA loans are among these. You will find these loan options at almost every lender that you approach. A careful comparison of fixed-rate and adjustable-rate mortgages is necessary. Besides, you should also be prepared to ask relevant questions when you visit a lender.
A government loan is either insured or guaranteed by a federal institution. Even a borrower with less-than-perfect credit score can qualify for an FHA loan. Moreover, you also don’t need big savings for down payment and closing costs. Eligible borrowers may find VA loans and RHS mortgages even more attractive.
If you do not have enough savings for down payment and other upfront costs, you may be benefited by a piggyback mortgage or a no cost loan. If you want flexibility in monthly payments, you can go for a 40-year fixed rate mortgage or an interest-only mortgage. You can avoid the need of a non-conforming loan by taking a combination of two loans.
Special Loan Programs
Lenders usually come with special loan programs to meet specific requirements of borrowers. You should approach a lender to ask about such programs, which may vary from one lender to another. There are, however, some loan programs that are not very common but can help borrowers facing unusual circumstances.