Purchasing a home is one of the most exciting moments of a person’s life, as it means that they have made one of the best investments possible for the average consumer. A home isn’t just a place to live: it ensures a happy, stable future, building equity and improving your credit so that you can continue to achieve bigger and brighter financial goals. It also demonstrates that you’ve proven yourself a reliable and responsible consumer who doesn’t take unnecessary risks, and who pays your bills on time every time.
When you’re ready to sign on the dotted line and get the keys to your own castle, you might be curious as to what the different mortgage products available on the market are. Each of them has their own drawbacks and benefits, which is why it’s so helpful to work with a qualified mortgage broker like District Lending throughout the mortgage application process.
Today, we’ll explore the different types of mortgage loans, then discuss why mortgage brokers are invaluable while applying for and securing a mortgage.
Fixed-rate mortgages
These mortgages will have the same interest rate throughout the life of the loan; they can be either 15 year or 30 year mortgages, depending on how much you can afford to pay on your mortgage each month. One of the best benefits of this is that your mortgage payment will never change throughout the life of the loan, so you will never be surprised by sudden spikes or peaks in your payment. It also protects you against inflation, as your rate will remain stable regardless of what happens on the housing market. Overall, this is a great choice depending on what the rates are when you purchase your home.
Adjustable-rate mortgages
These mortgages fluctuate with market conditions, meaning that they could change from month to month. An adjustable-rate mortgage often has a lower initial rate, which means that they’re slightly easier to qualify for, and you won’t be paying as much for the first few payments. However, if the market changes dramatically, you might find yourself paying more each month, and this can make it hard to budget. A lot of adjustable-rate mortgages have interest caps, which can ensure that as long as you have a range of payments you’re comfortable making, then you won’t need to worry about surging costs. You’ll also be afforded some flexibility of your own when it comes to adjusting your loan term.
FHA and VA loans
These are two types of loans that are ensured by the federal government, making it easier for borrowers to qualify as lenders know that they won’t lose all their money if you default. FHA loans are for those with lower credit scores or who cannot pay a large down payment; this program accepts people with credit scores as low as 500, though they will need to pay a larger down payment.
VA loans are for veterans and are administered by the Department of Veterans Affairs. Active service members, retired military, and select spouses of deceased military members can qualify for these loans, which require no down payment and often have lower interest rates than conventional mortgages.
It’s important to note that FHA and VA loans are not actually provided by the government; they are still agreements with private lenders. Rather, the US government guarantees them, meaning that the lender will not lose their investment if you fail to repay the loan.
Jumbo loans
These are supercharged conventional loans, and they can be fixed-rate or adjustable-rate. The reason that they are “jumbo” is because these loans are above the limits set by the Federal Housing Finance Administration, which currently has a limit of $726,200; mortgages larger than this cannot be guaranteed or insured with Fannie Mae and Freddie Mac, the two government-sponsored entities that trade most conventional mortgages in the United States.
Jumbo loans are good for those who live in expensive areas or who want a luxury home, but they are much harder to qualify for and are provided by a much smaller group of lenders.
Mortgage brokers can help you navigate the confusing terrain of mortgages with ease
Even with this quick primer, you likely still have a lot of questions about mortgages, and mortgage brokers like District Lending are here to help. With years of experience in the industry and with close connections to dozens of lenders, they can help you select the mortgage product that is right for your circumstances and that has the very best rates available. Whether that’s a fixed-rate, adjustable-rate, jumbo, or federally-backed loan, you can be assured that you will have guidance every step of the way – and that they can help you negotiate the lowest interest rate. Better yet, if you’re ever ready to refinance, they can assist you with finding a new lender to service your mortgage. You need an ally while hunting for a mortgage, and your very best bet is a mortgage broker.
