There are many types of mortgage loans are available and these are differentiated by loan structure and the agencies that make them secure.
Conventional financing is fixed rate mortgage that is not insured or guaranteed by the Federal Government. Also, this loan program is most difficult to qualify for their long requirements such as down payment, credit score as well as income. Conventional loans are divided as either conforming debts or non-conforming debts.Conforming loans comply with the guidelines limited by Freddie Mac or Fannie Mae. These stockholder owned organizations develop guidelines like the limitation of loans, for example, $417,000 for a single family home. Basically, a loan made above this amount is known as a jumbo loan and generally carries a slightly higher interest rate because of lower demand for loan pools with this debt in them. A non-conforming loan usually offers by portfolio lenders, and also have guidelines that are limited by the specific lending institution underwriting the loan.
The FHA or Federal Housing Administration, a part of the U.S department of housing and urban development, offers many mortgage loan options. An FHA loan has lower down payment needs and it easier to qualify for than a conventional loan. It is an excellent option for first time home buyers because, in addition to lower upfront loan costs and small credit needs, they offer down payments of as low as 3%.
VA or the US department of veterans affairs offers VA loans. A debtor should know that the VA does not offer loans itself, but guarantees mortgages made by qualified lenders. These guarantees allow veterans as well as people to get home loans with favorable terms. Usually, this loan program starts without any down payment and in maximum cases it is easier to for than conventional loans. Generally, lenders limit the maximum VA loan. You need to understand that, before applying for a loan, make a request eligibility from VA. If you are accepted, then the VA will issue a certificate of eligibility to be used in asking for a VA loan.
If you are searching for a home mortgage for the fist time, there are many things that can be done to decrease the difficulty of sorting through all the financing options. The best way is to put some time into deciding how much home you can really afford and then think about the finance accordingly. Homeowners who can afford to put a huge amount down or who have a big amount of income to develop a high coverage rate will give the most negotiating strength with lenders and maximum financing options. Also, one thing you should remember that a good mortgage broker or banker should be able to help steer you through all different options. Remember you are not asking for a business loan like an SBA 504 loan, you are going to purchase your own house so think and research before choosing an option.