*This is a repost*
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July 26, 2021/ 6 min read
Edited By Suzanne De Vita
1. Conventional loan
A conventional mortgage is a home loan that’s not insured by the federal government. There are two types of conventional loans: conforming and non-conforming loans.
A conforming loan simply means the loan amount falls within maximum limits set by the Federal Housing Finance Agency. The types of mortgage loans that don’t meet these guidelines are considered non-conforming loans. Jumbo loans, which represent large mortgages above the FHFA limits for different counties, are the most common type of non-conforming loan.
Generally, lenders require you to pay private mortgage insurance (PMI) on many conventional loans when you put down less than 20 percent of the home’s purchase price.
Pros of conventional mortgages
2. Jumbo loan
Jumbo mortgages are conventional types of mortgages that have non-conforming loan limits. This means the home price exceeds federal loan limits. For 2021, the maximum conforming loan limit for single-family homes in most of the U.S. is $548,250. In certain high-cost areas, the ceiling is $822,375. Jumbo loans are more common in higher-cost areas, and generally require more in-depth documentation to qualify.
Pros of jumbo mortgages
You can use Bankrate’s calculator to determine how much you can afford to spend on a home.
3. Government-insured loans
The U.S. government isn’t a mortgage lender, but it does play a role in helping more Americans become homeowners. Three government agencies back mortgages: the Federal Housing Administration (FHA loans), the U.S. Department of Agriculture (USDA loans) and the U.S. Department of Veterans Affairs (VA loans).
4. Fixed-rate mortgage
Fixed-rate mortgages keep the same interest rate over the life of your loan, which means your monthly mortgage payment always stays the same. Fixed loans typically come in terms of 15 years, 20 years or 30 years.
Pros of fixed-rate mortgages
5. Adjustable-rate mortgage
Unlike the stability of fixed-rate loans, adjustable-rate mortgages have fluctuating interest rates that can go up or down with market conditions. Many ARM products have a fixed interest rate for a few years before the loan changes to a variable interest rate for the remainder of the term. Look for an ARM that caps how much your interest rate or monthly mortgage rate can increase so you don’t wind up in financial trouble when the loan resets.
Pros of adjustable-rate mortgages
Other types of home loansIn addition to these common kinds of mortgages, there are other types you may find when shopping around for a loan. These include: