When it comes to shopping for a loan, understanding the key terms can make the process go more smoothly and help prepare you
to make a good financial decision. Get smart about the different types of loans that are available and find the one that best suits your needs.
Also known as a “conforming” loan, a conventional mortgage loan is any type of home loan that is guaranteed by a private lender or a government-sponsored enterprise like Fannie Mae. These loans are best for borrowers with good credit and an adequate down payment, which could be as little as 3% of the purchase price. Conventional loans can be either fixed rate or adjustable rate.
Both the Federal Housing Administration (FHA) and Department of Veterans Affairs (VA) offer guaranteed loans to help borrowers with income limitations or those who are current or former military. While they do require borrowers to meet specific terms, these loans usually have lower down payment requirements and less-restrictive qualifying guidelines. Consider checking with the FHA or VA, as well as your lender, for complete details if you think you may qualify for this type of loan. Government-guaranteed loans can be either fixed rate or adjustable rate.
Sometimes called “FRMs,” fixed-rate mortgages are home loans with an interest rate that remains constant throughout the entire length of the loan term. With FRMs, a borrower can plan for an exact base principal plus an interest payment amount for the next 10, 15, 20, or 30 years.
They’re a popular alternative to adjustable-rate mortgages, which have interest rates that rise or fall throughout the loan term, causing your payment amount to fluctuate.
An adjustable-rate mortgage (ARM) is a home loan with an interest rate that is flexible and subject to adjustment on specific dates or based on certain market conditions. An ARM can be beneficial for homebuyers looking to keep the loan for a limited period and/or who can afford the potential increase in interest rate over time.
These loans requirements are that borrowers only have to pay interest for the first several years, making the monthly payments lower than they would be with a fixed-rate mortgage. At the end of the interest-only period, borrowers will start to repay both principal and interest. This can be in the form of subsequent monthly payments or in a lump sum, also known as a “balloon payment.” In addition, most interest-only loans are structured as ARMs, meaning the rate and the monthly payment can increase or decrease throughout the life of the loan.
FHA loans have been helping people become homeowners since 1934. How do we do it? The Federal Housing Administration (FHA) – which is part of HUD – insures the loan, so your lender can offer you a better deal.
Learn about VA home loan eligibility requirements for a VA direct or VA-backed loan. Find out how to request a Certificate of Eligibility (COE) to show your lender that you qualify based on your service history and duty status. Keep in mind that for a VA-backed home loan, you’ll also need to meet your lender’s credit and income loan requirements to receive financing.
Can I get a Certificate of Eligibility for a VA direct or VA-backed home loan? You may be able to get a COE if you didn’t receive a dishonorable discharge and you meet the minimum active-duty service requirement based on when you served.
If you’ve served for at least 90 continuous days (all at once, without a break in service), you meet the minimum active-duty service requirement.
You can request a COE online right now.
https://www.va.gov/housing-assistance/home-loans/request-coe-form-26-1880
