For most people one of the largest purchases in your life will be a new home. The decision on obtaining a new home loan or refinancing your existing home loan can affect your financial life greatly. It's a serious financial responsibility to undertake and any mistakes could negatively influence your credit or, in a worst-case scenario, leave you without a home. You should consider the purchase of a home or mortgage loan refinancing carefully. Ensuring you get into the right mortgage loan can ease your fears of future financial struggles.
How Do I Know What's Right For Me?
How do you know which home loan is the right one for your financial situation? There are several types of home loans to choose from such as a Federal House Administration (FHA) insured loan, a Veterans Administration (VA) loan, so-called "Jumbo" loan programs, an Adjustable Rate Mortgage (ARM) loan, and a conventional mortgage loan. All of those choices combined with a wide variety of lenders can make finding the right mortgage confusing. Add to this the different terms, interest rates, and costs, some borrowers find themselves giving up before they even get started.
Types of Mortgages
Whether you are buying a home, refinancing an existing home loan, or trying to take equity out of your house, it's important to know about the different home financing programs currently available to you.
- FHA Loan
An FHA loan is one that's backed by the Federal Housing Administration (the FHA, which is a government agency under the Department of Housing and Urban Development, or HUD). Being backed by the FHA means that the mortgage loan is insured, protecting lenders like banks and other financial institutions from default if someone is unable to pay back their mortgage.
- VA Loan
A Veterans Administration (VA) loan works similarly. This type of mortgage loan is only available to members of the United States military who are either veterans or who are currently serving active duty (the loan is also available to surviving spouses with certain restrictions). The VA offers a benefit but isn't a direct lender. The mortgage loan money is available through a private lender, with the VA guaranteeing a part of the loan amount so you can receive better terms.
- Jumbo Mortgage Loan
Another type of mortgage loan is called a "jumbo" mortgage. This loan type gets its name from the fact that it's a large amount – the size of the loan comes in above what the Federal government typically limits. These limits are established by two agencies, Fannie Mae (FNMA) and Freddie Mac (FHLMC). When a mortgage loan amount goes over the limits that either Fannie Mae or Freddie Mac have in place, it's a jumbo mortgage.
In addition to the specialty mortgage loans, there are two primary loan types that the majority of homebuyers work with: fixed rate mortgages and adjustable rate mortgages. There are pros and cons to both types of mortgage products so it is very important to understand the mortgage differences before moving forward with any loan documents.
If you're interested in seeing what you may qualify for, or how much home you can afford, complete our easy to use online mortgage loan solutions form and we'll match you, for free, with a highly rated solution. You can also call us toll-free at 1-800-781-5187 to speak with one of our financial search specialists. AmOne's offices are open Monday through Friday from 9:00 AM to 9:00 PM and on Saturday from 9:00 AM to 5:00 PM Eastern time.