5 Types of Home Loans: Which One is Right For You?

By
  • E 3 Mortgage Corp
July 20, 2022
5 Types of Home Loans: Which One Is Right for You? | E 3

Most of us know what we want in a home, but choosing the right mortgage? That’s a little harder. Mortgages no longer come in a one-size-fits-all model, and there’s a mortgage for every lifestyle and budget. Here are five of the most common home loans on the market.

Fixed-rate loan

Fixed-rate mortgages are by far the most common loan. They’re appealing because once you lock in a mortgage rate, your monthly payments never fluctuate. So while your principal and interest rates may change, your monthly payment is locked in for good.

If fixed-rate mortgages have a downside, they’re harder to qualify for when interest rates are high. The good news is that interest rates are still historically low while rising.

Adjustable-rate loan

Adjustable-rate mortgages generally come with interest rates set below market value. Sounds good, right? The downside is that adjustable-rate mortgages change with time. In other words, your initial low-interest rate will likely surpass the market rate in the future. Unfortunately, you can’t predict when it’ll happen.

FHA loans

FHA loans are backed by the Federal Housing Administration and are ideal for first-time home buyers with weak credit scores (no lower than 580) or who lack sufficient savings to offer a 10-20 percent down payment on a home.

While a specific income amount doesn’t determine eligibility, applicants must be able to verify income with pay stubs, W2s, federal tax returns, and bank statements. Additionally, to meet basic FHA requirements, buyers must have their home appraised by an FHA-approved appraiser, make the house their primary residence, and pass an FHA home inspection.

VA loans 

VA loans indeed have a bad reputation; that’s unfortunate because the Department of Veterans Affairs made big changes to ensure that VA loans now compete with other mortgage offerings.

As you may have guessed, VA loans are designed for those who have served in the U.S. military. If you’re an active or veteran service member, you are likely eligible for a VA loan—with a few caveats. Applicants must have served 90 consecutive days of active duty during wartime, 181 days during peace, or six years in the National Guard or Reserves.

VA loans are unique because they are only available to those with a U.S. military service record. In addition, VA loans are appealing because they come with competitive interest rates and zero down-payment options.

USDA loan

USDA loans are another government-backed option, ideal for those living in rural areas. They’re attractive because the government finances 100 percent of the home’s price, which means buyers do not have to produce a down payment.

To qualify, applicants must have a credit score of at least 640 and a stable income. They must also have an adjusted household income equal to or less than 115 percent of the area median income. Finally, the home must be your primary residence and be located in a qualified rural area.

E 3: For all your mortgage needs

E3 Mortgage Corp is a team of qualified, professional loan experts dedicated to helping people like you. Whether you’re considering buying a home or already own one and want to refinance, we have over 25 years of real estate and mortgage experience you can lean on. With many happy customers, we’re a company you can trust. Contact us today to learn how we can help you!