Mortgage loans represent one of the biggest financial investments you’ll make. That’s why it pays to shop around and find lenders offering loan programs tailored specifically to your needs.
Top mortgage lenders provide a selection of purchase and refinancing loans, as well as an easy digital mortgage process that’s easy to track.
1. Conventional Loans
Conventional loans tend to be easier for first-time home buyers to qualify for, according to Ragusa. They require less documentation than government-insured loans and lenders may be more flexible in how they assess finances and credit histories of applicants.
Conventional loan requirements depend on your lender, but generally the minimum credit score requirement for conventional loans is 620. Even with lower scores, VA and USDA loans may still be an option – particularly for eligible service members and veterans – or FHA loan programs which provide zero down payments to eligible buyers.
Conventional loans also offer another advantage, in that they do not come with private mortgage insurance (PMI), which you must pay if your down payment falls below 20 percent. Once 20 percent equity has been reached in your home, however, PMI may be cancelled upon request.
2. FHA Loans
FHA loans provide an easier route to homeownership for individuals who might otherwise struggle, making the leap more attainable and quickly purchasing a home with limited savings and/or credit restrictions than conventional mortgages.
FHA loans allow borrowers with credit scores as low as 580 to qualify for financing if they can put down at least 10%, as well as no PMI (private mortgage insurance), which could save you money over the lifetime of your loan.
Some lenders specialize in both FHA and conventional loans; other may specialize exclusively in one. Before selecting your lender, be sure to compare interest rates and fees carefully – this could help save thousands over the life of your loan! You can easily find sample rates online.
3. Renovation Loans
Renovation Loans While renovation loans may not be as popular as mortgages, home equity loans or HELOCs, they provide an exceptional financing option for those interested in renovating or making energy-efficient upgrades to their home. Unlike personal loans or credit cards, renovation loans are determined based on future valuation of your property as it will have changed following any upgrades made.
Single-close renovation loans utilize an estimated after-renovation value (ARV) to determine how much a homeowner can borrow – increasing borrowing power by an average of 11x and streamlining disbursement with only one set of closing costs and inspection procedure required.
This type of loan is perfect for first-time buyers who have yet to accumulate enough equity for other types of loans, or existing homeowners who prefer its speed, simplicity, and lower rates over full cash-out refinancing.
4. Interest-Only Loans
Home buyers were attracted to interest-only home loans during the housing bubble and many lenders still offer them today, though only those who understand and can manage risk should opt for them. Since these borrowers won’t build equity during this period and could lose their homes if prices collapse.
Loans designed for short-term living may be best suited to buyers who wish to keep the initial mortgage payments lower and are ready to make higher monthly mortgage payments when the interest-only period ends. They may require greater down payment amounts and require greater qualifying standards than conventional mortgages, however.
5. Construction Loans
Since construction loans can be more complex than traditional mortgages, lenders typically require higher credit scores and equity to offer financing for these types of loans. However, some of the top construction loan lenders provide flexible eligibility requirements and wider service areas that make qualifying easier for home buyers.
Go Mortgage offers government-backed construction-to-permanent loans with competitive interest rates and low down payment requirements, along with an easy online preapproval process and mobile platform for managing loans in 35 states plus Washington, D.C.
FMC Lending stands out as another top lender that provides construction-to-permanent loans across multiple states with jumbo loan limits, flexible loan terms and an exceptional loan-to-value ratio – ideal for entrepreneurs or freelancers with fluctuating incomes.
6. Jumbo Loans
Homebuyers looking for financing their dream homes at higher-priced areas or in areas that exceed conforming loan limits will find Jumbo loans an invaluable option. Often larger than conforming loans and capable of reaching up to $5 million in value, jumbo loans require borrowers with strong credit histories, an income source and cash reserves to secure such an arrangement.
Lenders will also look at whether your debt-to-income ratio doesn’t surpass 40% and some lenders may require you to have saved enough funds in an emergency fund to cover at least six months’ of mortgage payments in an emergency fund.
However, just because a loan is classified as “jumbo” doesn’t automatically equate to higher interest rates; rates vary based on market conditions, borrower credit history and down payments and cash assets available to them. They’re typically only available for use on personal residences – investing with them was easier 15-20 years ago but lenders have tightened requirements due to the housing crisis.
7. Adjustable-Rate Loans
Those looking for low interest rates for the short term might benefit from an adjustable-rate mortgage (ARM). ARMs feature fixed rates during their first five or 10 years and then adjust based on market conditions thereafter – most don’t require PMI, saving borrowers money every month.
Fixed-rate loans provide a consistent interest rate and monthly payment over the life of your loan, helping you manage your budget better during times of high inflation when even small fluctuations can have a compounding effect over time. 5/1 and 7/1 adjustable rate mortgages (ARMs) provide buyers with initial periods of lower fixed rates before switching over to market fluctuations; 10/1 ARMs provide protection from market-driven interest rate fluctuations for longer.
8. Home Equity Loans
Home equity loans allow homeowners to turn the equity built up in their home into cash. Usually used for renovations, debt consolidation, and medical bills. Pros: Home equity loans often offer lower interest rates than personal loans or credit cards which helps lower overall borrowing costs; additionally they tend to come with longer repayment terms which make payments more manageable over time.
Cons: Borrowing using your home’s equity puts it all on the line, so this form of financing should only be considered when there is a plan in place to increase property values or if an immediate large purchase must be financed immediately. Failing to meet payments can result in foreclosure proceedings being filed.
Home equity loans require adequate income, and lenders will review your credit to assess eligibility.
9. Home Equity Lines Of Credit
Home equity lines of credit and loans enable homeowners to tap their ownership stake in their home as collateral against borrowing. Lenders assess both its current market value and how much debt remains outstanding to determine how much equity a homeowner can access from home equity loans and lines of credit.
Home equity loans often consist of one lump sum paid back through fixed monthly installments; home equity lines of credit work more like credit cards by allowing homeowners to draw funds as needed from an allocated credit limit and only pay interest on what was actually borrowed.
Both forms of financing use a borrower’s home as collateral; that is, their property may be taken by lenders if they fail to make payments on time. When shopping around for financing options it is wise to do your research; rates and terms can differ, while some financing could even be tax deductible.
10. Refinance Loans
Refinancing loans provide homeowners with the chance to use home equity to refinance their loan terms and save both monthly and long-term money by changing the terms. They also give borrowers the ability to cash out some equity and combine two mortgages into one payment if that option becomes necessary; although this process could require subordinating of one mortgage by its lender first.
Bank of America and Guaranteed Rate are two consumer lenders that provide refinancing options, both featuring online mortgage processes that enable borrowers to sign, submit and track documents from either their phones or computers.
Borrowers typically choose refinancing for lower interest rates or to switch from fixed-rate loans to adjustable rate loans, or shortening their repayment term in order to pay off faster and reduce overall costs. Sometimes borrowers must also pay a prepayment penalty when leaving an old loan agreement behind.
Also Refer : Which Loan Is Best To Buy A Car?
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