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Types of Mortgages

June 15, 2020 Published by

types of mortgages

A mortgage loan allows you to enjoy your dream home. At Capitol Homes, we assist you in selecting and completing the ideal loan option for your home-building situation. Compare these five common types of mortgages today to discover how you can get started affordably building your dream home.

Conventional Mortgages

Many mortgages fall under the conventional mortgage category. These loans aren’t backed by the federal government and can be either conforming or non conforming. Conforming loans fit under the limits set by Fannie Mae or Freddie Mac, while non-conforming loans are typically larger than the set limits.

A conventional mortgage is very flexible. You can use it for your primary home or investment property. Borrowing costs tend to be lower, and you typically only need private mortgage insurance until you have 20% or more equity.

Unfortunately, this type of mortgage typically requires a higher FICO score and debt-to-income ratio than other loan types. Income verification may also be more strict than government-backed mortgage options.

FHA Loans

Choose an FHA loan if a large down payment isn’t possible in your current situation. You don’t need as high of a FICO score or down payment for an FHA loan, so it’s a great option if you’re just getting started and don’t have a significant amount saved for a down payment. While the initial costs of a government-backed loan may be lower than a conventional option, you’ll typically pay more in total borrowing costs over time.

Jumbo Mortgages

Looking at homes over the federal loan limit? Jumbo mortgage loans are designed for these large, expensive homes. Whether you’re purchasing a large amount of property, a home in a high-cost area, or a large, luxurious home design, jumbo mortgages are an excellent option with competitive rates.

Most jumbo mortgages require a FICO score of 700 or more. Depending on your area and your particular mortgage, expect to have a 20% down payment and significant assets saved to show proof of payment.

Adjustable-Rate Mortgages

Don’t lock in interest rates if they are at a historic high. Most mortgages lock in your rate for the lifetime of your loan. An adjustable-rate mortgage offers a low, fixed-rate for the first few years of payments. After that, the interest rate will recalculate.

For many homeowners, the new rate may be higher than the initial rate. Choose an adjustable-rate mortgage if you’re prepared for a certain level of risk or if you’re considering selling your home after a few years.

Fixed-Rate Mortgages

A more stable, secure option is a fixed-rate mortgage. While you may be paying slightly higher rates at the beginning of your loan, you’ll have a definite payment amount for the next 15, 20, or 30 years. This stability is an excellent idea for homeowners looking to set a definite budget.

A fixed-rate mortgage is a long-term plan. It’s best for homeowners who are looking to keep their home for seven years or more. In the long run, you can expect to pay less than homeowners choosing adjustable-rate alternatives.

Discuss Your Mortgage Options Today Start your homeownership journey today by discussing mortgage loans with Capitol Homes, Inc. Contact us today to explore your mortgage options and find out how you can afford the home of your dreams. We’ll work with you to select the best loan to suit your financial situation and your dream home design

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