In this beginner’s guide to mortgage loans, we’ll break down the essentials for you. From understanding the basics to finding the right loan, we’ve got you covered.
Types of Mortgages
Conventional mortgages are the most common type of home loan and are not guaranteed by the government.
FHA loans are insured by the federal housing administration.
USDA loans are guaranteed by the US Department of agriculture. They are for suburban and rural homebuyers.
VA loans are guaranteed by the department of Veterans Affairs. They are currently for military service members and veterans.
Conventional: The minimum down payment required is 3% if you meet the credit requirements.
FHA: Minimum is 3.5% if you meet the credit requirements.
USDA: Usually require no down payment.
VA: Usually require no down payment.
“A 20% down payment may be traditional, but it’s not mandatory — in fact, according to a 2023 report from the National Association of Realtors, the median down payment for all U.S. homebuyers is 14% of the purchase price, not 20%.”
Things to Avoid When Obtaining a Mortgage
It is advisable to refrain from making any financial alterations until your mortgage is fully approved. Here are a few examples of what not to do during the process:
- Making large purchases like furniture for your new house
- Switching jobs
- Buying a new car or starting any other new loans
- Co-signing on a loan
- Maxing out credit cards
- Lowering your credit / falling behind on bills
There are several mortgage term options available for homebuyers. The most popular option is the 30-year fixed rate mortgage, which comes with a set interest rate for the duration of the loan’s life. Alternatively, a 15-year loan may be a better option for those seeking a lower interest rate. Keep in mind that the monthly payments for a 15-year loan are typically higher than those for a 30-year mortgage which can cause stress in many different aspects of your life.
If you’re curious or in the mood to chat with a mortgage guru, drop a comment or fire off an email my way!