Mortgage Loan Types
Types of Mortgage Loans Open to You
There are many different mortgage loan types for home buyers to choose from. Finding the right mortgage can be the most daunting and tiresome task that you may ever experience. With so many loan types and loan programs available, the search for the perfect mortgage can be a real strain. Lenders, banks, finance companies, mortgage companies and credit unions are just a few of the places to obtain a mortgage loan. If you are baffled by the choices available to you, there are many sources of valuable information about mortgages. Mortgage brokers, financial planners, real estate agents, articles in newspapers and increasingly the Internet are great places to start in order to gain the information you need before you take the plunge.
Federal Housing Association, FHA, Veterans Affair, VA
The Federal Housing Association (FHA) and the Veterans Affair (VA) offer some of the most popular mortgages. As the government backs the FHA and VA, their loans tend to enjoy lower interest rates and fees than any other loans. Other popular types of loans include conventional loans through Fannie Mae and Freddie Mac.
Fannie Mae, the common name for the Federal National Mortgage Association, is a shareholder company that buys loans from lenders and resells them on the secondary mortgage market. Loans approved by Fannie Mae tend to qualify for more favorable rates. Of course, Fannie Mae will only approve you for a mortgage once it has carried out a number of checks. Employment history, credit rating and debt ratios are checks that will be made before you qualify.
Freddie Mac, otherwise known as the Federal Home Loan Mortgage Corporation, works in much the same way as Fannie Mae, in that it does not offer direct mortgages, but simply resells them as securities on the secondary mortgage market. It too will conduct a number of checks before approving you for a loan. The maximum loan limit for both, at the time of writing, is $333,700.
A loan obtained from the Federal Housing Administration tends to have advantages over conventional loans. As the government guarantees these loans, the FHA will as a rule have more relaxed qualification rules than other lenders and can often require a much smaller down payment. Twenty percent of residential mortgages in the US are financed through the FHA.
A Veteran Affairs loan holds many of the characteristics of an FHA loan. In order to be approved you must be a qualifying veteran, a public health service officer, a widow of a veteran or an active–duty serviceman or woman. The maximum loan amount for a VA is $240,000. Loan amounts that exceed this limit may be considered, however, a large down payment may be required and the amount cannot exceed the limits of conventional loans.