common home loan types

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If you’re in the early stages of the home buying process, you might not be familiar with the variety of loan options out there. You might even be hesitating to take the next step because you are afraid you won’t qualify for a Conventional Loan. As Portland mortgage brokers, we hear that a lot.

One of the biggest concerns we hear from new clients is that their credit score is too low or they don’t have a 20% downpayment ready and probably never will. So, over the next several posts, we will take some time to lay out some very basic info. Of course, calling us is a great way to have all of your questions answered, but we know some people like to have a little info beforehand to shatter a bit of the mystery.

Please keep in mind this is going to be very basic, easy-to-digest information to help clear the mud a little for you. We don’t want to bog you down with jargon and more detail than you want right now.

Conventional Loans

This is most likely what you think of when you think of a home loan. A conventional loan is probably the one you’ve heard of that made you think you needed 20% for a down payment. Conventional loans do require a down payment. Anything under 20% will require you to pay PMI (Private Mortgage Insurance). Conventional loans often require a higher credit score, with 620 being a good minimum to shoot for.

FHA Loans

An FHA loan is backed by the government. The Federal Housing Administration tells the lender, “Hey. We want people to be able to buy homes. This guy doesn’t have the best credit score and can’t come up with a giant down payment, but we really want him to buy a home. You trust us. We’ll carry some of the risk.”

So, with less risk on the lender, the lender is able to offer mortgage loans to people who don’t qualify for conventional loans. FHA loans don’t require a 620 credit score and some lenders will accept as low as a 500 credit score. Down payments can be as low as 3.5%.

Another helpful bit of info is that with an FHA loan, your down payment can come in the form of a gift or donation from a third party, like parents, brothers, or your kid who just inexplicably became a Youtube star.

VA loans

VA loans are available for active military members, retired veterans and, in some cases, spouses of military members.

As a benefit for serving, the government backs all VA loans, taking 100% of the risk off of the lender. The buyer is not required to have a down payment and due to the backing by the United States government, the lender is able to offer lower interest rates.

Ask a mortgage broker about even more loans you might qualify for

These are just three of the most asked-about loans. There are also loans for rural homes, homes that need some TLC, and more. Mortgage brokers can look at your financial situation and help you choose the loan that works best for you. Mortgage brokers can also tell you where you might be lacking when it comes to approval chances.

Keep calm and call a local mortgage broker

Listen, we get that it can be scary and intimidating. We know it might seem easier to just close the laptop and tell yourself that mortgages are too complicated and that buying a house isn’t for you. We know this because we hear it from new clients all of the time. Seriously. A day rarely goes by without a call or visit from someone worried they’ll never be a homeowner.

This is one of the main reasons mortgage brokers exist. We are very aware of how big the mortgage world is and how much information exists because navigating it is literally our job. One person can’t be an expert on everything. How obnoxious would that guy be?

But really, as mortgage brokers, we have studied, researched, and educated ourselves on all of the ins and outs of the home-buying process the way a jeweler knows gems or a barber knows beards. We never stop educating ourselves, either. As policies and procedures change, we keep up. There’s a reason you go to an expert when you want something done right. You don’t have time to learn everything there is to know about every service you need in life. We’ve got this one for you.

Reach out to us with any questions or to get started on the right path to purchasing your future home.