There are several different types of residential mortgages, each with its own unique features and benefits. Some of the most common types of residential mortgages include:
Conventional mortgage: This is a mortgage that is not backed by the government and is available through a bank or other lender. Conventional mortgages may require a down payment of at least 5% and have stricter credit and income requirements than government-backed mortgages.
Federal Housing Administration (FHA) loan: This is a mortgage that is backed by the Federal Housing Administration (FHA), a government agency. FHA loans are designed to help first-time home buyers and those with lower credit scores or limited down payment funds. FHA loans may require a down payment as low as 3.5% and have more lenient credit and income requirements than conventional mortgages.
Department of Veterans Affairs (VA) loan: This is a mortgage that is backed by the Department of Veterans Affairs (VA), a government agency. VA loans are available to active military personnel, veterans, and their families. VA loans may require no down payment and have more lenient credit and income requirements than conventional mortgages.
United States Department of Agriculture (USDA) loan: This is a mortgage that is backed by the United States Department of Agriculture (USDA), a government agency. USDA loans are available to buyers in rural areas and may require no down payment. USDA loans have more lenient credit and income requirements than conventional mortgages.
Adjustable-rate mortgage (ARM): This is a mortgage with an interest rate that can change over time. The interest rate is usually fixed for an initial period, after which it adjusts based on a benchmark rate, such as the prime rate. ARM loans may have lower initial interest rates than fixed-rate mortgages, but the monthly payments can increase if the benchmark rate goes up.
Fixed-rate mortgage: This is a mortgage with an interest rate that remains the same for the entire loan term. Fixed-rate mortgages offer predictability and stability, but the interest rates may be higher than those for ARM loans.
It’s important to carefully consider the different types of mortgages and choose the one that is right for your financial situation and needs. It’s also good idea to speak with a financial advisor or mortgage lender to understand your options and find the best mortgage for you.