Top 5 Loans That The Best Mortgage Lenders Love To Use
Conventional Home Loans
Conventional loans are the most commonly used kind of mortgage loan. Conventional loans require good credit scores and at least a 10% down payment on the house you are buying. The interest rates can be fixed or variable, and they are for 15 or 30-year loan terms, and sometimes even offer an "interest only" option where a borrower only pays interest and not the principal balance for lower home payments the first part of the loan term.
FHA Home Loan
The Federal Housing Administration (FHA) mortgage loan is a government-insured loan. The government insures the lender against losses that may happen if the borrower chooses to default on their loan terms. There are a lot of advantages for the borrower of an FHA loan, including only having to have a down payment of as low as 3.5% and being able to qualify with a lower credit score. However, to make up for that, the borrower does have to pay for mortgage insurance, also known as PMI.
VA Home Loan
VA loans are also government-insured loans guaranteed by the United States Department of Veteran Affairs (VA) department. VA home loan programs allow eligible veterans purchase a home without needing a down payment. Borrowers need to have a credit score of at least 620, and the house needs to be the borrower's primary occupancy. But they have the advantage of being one of the only government-backed home loans where borrowers are not required to pay PMI insurance which will save the borrower thousands of dollars in insurance costs.
Rural USDA Housing Loan
The United States Department of Agriculture (USDA) offers a home loan program for borrowers in rural areas in America who meet specific income requirements. This loan is gaining popularity in the rural and suburban areas of America because of the loans' low-interest rates and zero down payment option. Rural USDA home loans do have specific requirements that borrowers need to meet to qualify, such as income specifications. Income cannot be higher than 115% of the adjusted area median income of the county where the borrower lives. There are also other requirements involved with this type of loan, including specific time frames for selling the house, how much the house can sell for, your income at the time of sale, and more.
Fixed Rate Loans
Every mortgage loan offered has either fixed or varied interest rate, or a hybrid of the two. While lenders do still offer adjustable rate loans that start out with a lower interest rate that steadily climbs through the course of the loan, lenders typically offer the more popular fixed rate loan option. Fixed rate home loans use the same interest rate over the course of the mortgage repayment term. Fixed rates allow the monthly mortgage payment to remain the same price, every month until the term completes. Fixed rate loans are popular with borrowers because they are protected from sudden interest increases when they find a loan with a low-interest rate. However, they are a popular option for lenders because when interest rates are higher, that same interest rate remains in force even after interest rates drop.