13 Types of Mortgages to Choose From When Buying a Home
The majority of lenders want a debt-to-income ratio of 43% or less. An FHA mortgage does not require PMI, but it does require a different sort of mortgage insurance.
At closing, it will cost you 1.75% of your mortgage. Then you’ll pay an annual premium ranging from 0.45% to 1.05% of your mortgage balance.
4. VA home loan
A VA mortgage is a government-backed mortgage insured by the United States Department of Veterans Affairs that is only available to military families. VA mortgages often provide lower interest rates than conventional mortgages and do not require a down payment.
To qualify for a VA mortgage, you must have a 660 credit score and a debt-to-income ratio of 41%. You will not have to pay mortgage insurance, but you will have to pay a funding fee.
If this is your first VA loan, the charge is 2.3% of the loan amount, or 3.6% if you’ve previously used a VA loan. However, if you have money for a down payment, the charge will be cheaper.
5. USDA loan
A USDA mortgage is a government loan guaranteed by the United States Department of Agriculture. It is intended for low-to-middle-income households purchasing a home in the country or suburbs.
The qualifying income level varies depending on where you live in the United States. Some counties have population limits of 20,000 people, while others have limits of 35,000 people.
A USDA mortgage, like a VA mortgage, has lower interest rates and does not require a down payment. Most lenders want a credit score of 640 and a debt-to-income ratio of 41%.
Mortgage insurance will be required, but it should be less expensive than PMI or insurance on an FHA mortgage. At closing, you’ll pay 1% of your principal, followed by an annual premium of 0.35% of your remaining capital.
6. Fixed-rate mortgage
When it comes to locking in an interest rate, you have two options: fixed-rate or adjustable-rate mortgages. Depending on the sort of mortgage you obtain, you may be able to choose between the two or be limited to only one.
A conforming mortgage, for example, can have either a fixed or adjustable rate, whereas a USDA mortgage can only have a fixed rate. A fixed-rate mortgage locks in your interest rate for the life of your loan, so even if US mortgage rates rise or fall over time, you’ll still pay the same interest rate in 30 years as you did on your first mortgage payment.
