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Are you thinking of buying a house?  How do you know what type of mortgage is right for you?

The type of mortgage you use to buy a house affects what you'll need to qualify for the loan (including the required down payment amount) and how you'll pay it back. Choosing the right home loan can boost your chances of approval and may save you thousands in the long run.

Before you decide which type of mortgage to pursue, it’s important to learn the advantages and drawbacks of each one. Here are some of the main types of mortgages:

Conventional loans are mortgages that are not guaranteed by the federal government. They offer low minimum down payments, but have more stringent qualifications.

FHA loans are mortgages backed by the Federal Housing Administration. These are generally easier to qualify for than conventional loans, but have stricter requirements for mortgage insurance.

VA loans from the Department of Veterans Affairs are for active or former service members and eligible spouses. VA purchase loans allow you to make no down payment.

Jumbo loans are mortgages for houses that are more expensive than standard lending limits. These usually require larger down payments and higher credit scores.

Renovation loans let you wrap the costs of home improvements into the total amount of the home loan. Especially when mortgage rates are low, this can be a way to borrow more money for repairs while paying less interest than you would with another type of home improvement loan, like a personal loan.

With each of these loan types, you may have the opportunity to choose between a fixed-rate or an adjustable-rate mortgage (also called an ARM). As you probably guessed from the names, fixed rates are static; adjustable rates can move up or down. An ARM loan can start at a lower interest rate than a fixed-rate loan, enabling you to buy more home for the same monthly payment — but rates can increase (or decrease) over time.

You'll also need to choose the mortgage term. Thirty-year mortgages are the most common, but 10-, 15- or 20-year terms may be available at a lower interest rate.

Contact your local mortgage broker or the your banking institution for more information.

Evduza Ramaj

Inside Realty