The world of mortgages is vast and weird - here’s another guide to a few more common types of mortgages!
Last month, we talked about the two most common types of conventional loans: fixed-rate and adjustable-rate mortgages. This week, we’ll start talking about a couple unconventional mortgages (ie, mortgages that can’t be bought up by Fannie or Freddie): the FHA mortgage and the VA mortgage.
The Federal Housing Administration (FHA) is part of the Department of Housing and Urban Development (HUD) and provides mortgage insurance for lenders to help keep risks low (and keep lenders lending, and therefore buyers buying).
An FHA mortgage is a mortgage provided by a lender that’s insured by the FHA. An individual or family that qualifies to receive an FHA mortgage can get a few different benefits, according to HUD:
These loans open the door for homeownership to individuals who might not otherwise be able to qualify for a conventional loan due to credit score or small savings for a down payment. Borrowers with good credit and a sizable down payment ready will likely be able to find a better-fitting loan elsewhere.
The US Department of Veterans Affairs (VA) backs private lenders to allow them to offer special mortgages to veterans, service members, and reserves as a well-earned benefit for their service. No, this isn’t some simple 5% discount off the home’s total price - it’s actually much better!
To help our nation’s finest become homeowners and maintain their properties, a VA-backed mortgage comes with the following benefits:
As implied, this mortgage is ONLY available to servicemembers, reserves, and veterans. And it can ONLY be used for primary residences, not for commercial or secondary residence properties of any kind.
That’s the basics about these two types of special loans. As with all mortgages, data fluctuates and the market changes, so talk to a mortgage specialist to see what your options are!
Mark Klein- 132598
NW Mortgage- 128113