Mortgage loans are no different from other types of loans. It too has its standards, and each type has its terms and features. If you are planning to take out a mortgage loan for the first time, you need to equip yourself with knowledge and familiarity on how it works. There are many things you need to learn when it comes to it, but one of the things you need to know is the different types.
If you are planning to take out home loans Houston TX, then you must know the basic and most popular ones. Usually, they are considered the best based on what they have to offer. However, you have to understand that what is best for someone you know may not exactly be the perfect one for you based on your situation as well as your finances.
If you are not sure on how and what to do when taking out a mortgage loan, you can check for expert tips on a successful home purchase, but for now, get to know about the basic types of mortgage loans.
A conventional mortgage is easily considered the most common type of mortgage loan. It is one of the easiest to get approved. Most of the time, they only require you to have a good credit score and at least ten percent of the total cost of the property for a down payment. It also offers reasonable interest rates, and in case you have any financial difficulty, you can opt to pay for interest only. However, when you get back on your feet, it is best not to pay for interest only as your principal also needs to get paid.
It is common for many people to think that this is only for first-time buyers; however, it is good to note that this is for everyone. The good thing about this type of loan is it requires a lower credit score at 580 and an even lower down payment at 3.5 percent. And you have to note that interest rate is not as good as traditional ones. It is more challenging to qualify here than the latter mentioned too.
USDA Rural Housing Loan
The USDA Rural Housing Loan is considered one of the best when you are looking for one that doesn’t require any down payment. However, this type of loan is only applicable in certain areas and towns in the country. As the term implies, it mostly covers rural areas although they can also be flexible in terms of the location of the property.
The VA loan is offered only to US veterans and their families. So, unless you fall within the category, don’t waste your time trying to apply here. However, if you are qualified, then you may even get a home loan with no down payment.
Adjustable Rate Mortgage
The Adjustable Rate Mortgage (ARM) is one of the best types of loans in terms of the interest rate. Frequently, it starts lower in interest rate as compared to other kinds of loans. However, it eventually increases after a year or two. Thus, you cannot predict how much you will pay during the entire duration of your loan making it risky.