Mortgage Guides:
Find the Right Home Loan For Your Needs
- October 18, 2022
No two homebuyers are the same. Whether you’re buying your first house or you’ve been around the block, we’ll help you decide which type of loan meets your needs. Click on any of these loan types to learn more.
Just as no two homebuyers are the same, no two financial situations are the same. Every single family is different, and every real estate purchase or sale comes with factors one might not think about initially. Some of these factors include negotiable closing costs, different mortgage rates, foreclosures, varying property taxes, any money or funds held in escrow accounts, and more.
FHA Loan
Federal Housing Administration (FHA) loans are popular for first-time home buyers since they have flexible requirements when it comes to your credit score and down payment amount.
Ideal for: First-time homeowners
Benefits:
- Down payments as little as 3.5%
- Lenient credit requirements
- Low interest rates
30-Year
Fixed Rate Loan
This is one of the most popular loan types, with monthly payments spread over 30 years and a stable interest rate.
Ideal for: Buyers seeking rate security
Benefits:
- Down payments as little as 3%
- Low, fixed interest rates
- More affordable monthly payments
Conventional Loan
A conventional loan is a mortgage loan that’s funded by a private lender and not backed by the government. It can be tougher to qualify for a conventional loan, but they offer benefits for a wide variety of homebuyers.
Ideal for: Buyers with a great credit score and little debt
Benefits:
- No upfront mortgage insurance fee
- Flexible down payment options
- More options for loan structure
Reverse Loan
Reverse loans (or reverse mortgages) are reserved for homeowners 62 and older. They allow homeowners to borrow a portion of their home’s equity as tax-free income.
Ideal for: Seniors ages 62 and older
Benefits:
- Support for retirement
- You can keep your current home
- Proceeds taxed
Debt Consolidation Loan
This loan involves borrowing more money than you owe on your current mortgage and using the difference to pay off other debt. This could include credit card loans, car loans, or student loans
Ideal for: Prospective home buyers who need to pay off debt
Benefits:
- Alternative way to pay off high-interest debt
- Savings can be applied to your principal to pay down your balance
- Credit score may improve with less revolving debt
Jumbo Loan
This type of mortgage is used to finance homes that are too expensive for a conventional or FHA loan, usually $500K or more.
Ideal for: Qualified buyers seeking high-value properties
Benefits:
- Access to more funds to buy a high-value home
- Ability to consolidate financing under one loan product
15-Year
Fixed Rate Loan
This loan spreads your monthly payments over 15 years. Since you pay off this loan faster, the interest rates are lower.
Ideal for: Buyers who can afford higher monthly payments
Benefits:
- Pay off your home faster
- Lower interest rate
Adjustable Rate Loan
Adjustable rate loans start with a low fixed-rate for 3-10 years followed by periodic interest rate changes. These differ from fixed rate mortgages, which maintain one interest rate for the entire duration of the loan.
Ideal for: Buyers who might move or sell their home in a few years
Benefits:
- Potential savings during the initial fixed-rate period
- Flexibility if you plan to make life changes soon
VA Loan
Veterans Affairs (VA) loans are exclusively for US veterans, active-duty service members, and qualified spouses.
Ideal for: Qualified veterans, service members and spouses
Benefits:
- Down payments as low as 0% for qualified buyers
- Low interest rates
- Flexible qualifications
Second Mortgage /
HELOC
A second mortgage is a loan taken against your current home that’s already mortgaged. A second loan, or mortgage, can come in the form of a home equity loan or a home equity line of credit (HELOC).
Ideal for: Homeowners who want to turn their home equity into liquid money without selling
Benefits:
- Higher loan amounts
- Potential tax benefits
- Lower interest rates
Line of Credit Loan
A line of credit refers to a flexible loan from a financial institution. It consists of a defined amount of money which you can repay immediately or over time.
Ideal for: Financing a project or covering income gaps
Benefits:
- Can be cheaper than relying on credit cards
- Flexible payment schedules
- Helps navigate uncertain project costs
Interest Only Loan
In this type of mortgage, the borrower only pays the interest on the loan for a certain period of time—usually 5-10 years. Once the interest-only term ends, the borrower renegotiates the loan.
Ideal for: People with ample assets and great credit
Benefits:
- Good option for people who aren’t looking to be long-term homeowners
- May help you afford a more expensive home
- Initial monthly payments are typically lower
Refinance Loan
This type of loan can help you save money by refinancing your current mortgage into a lower rate. You may also consolidate various types of debt into one, low-rate loan.
Ideal for: Current homeowners eligible to refinance their mortgage
Benefits:
- Reduce your monthly mortgage payment
- Consolidate debt to repay it faster
MHDC/IHDA Loan
Some states offer assistance to first-time homeowners. For example, the Missouri Housing Development Commission (MHDC) and Illinois Housing Development Authority (IHDA) have programs to help buyers obtain financing.
Ideal for: First-time homeowners
Benefits:
- Secure financing in a competitive market
- Flexible qualification
- Low down payment options
USDA Loan
U.S. Department of Agriculture (USDA) loans are zero down payment mortgages exclusively for buying homes in eligible rural or suburban areas.
Ideal for: People who prefer rural areas over cities or suburbs
Benefits:
- No down payment required
- Low interest rates
Physician Mortgage Loan
A physician loan or “doctor loan” is a special type of mortgage for new medical professionals to help them buy homes before they would otherwise be able to.
Ideal for: Doctors who are just entering their field
Benefits:
- Usually doesn’t require a down payment
- Can exempt you from private mortgage insurance (PMI)
- Makes homeownership possible, despite a large debt-to-income ratio
We understand looking at all these different loan types can be a little overwhelming. After all, what do you do if you realize your situation might be perfect for more than one type of loan? Not to worry. Delmar Mortgage is committed to doing Right by You. Our team of experts will work with you through every step of the journey to homeownership.
Whether you’re looking at your first family home, the next upgrade to a bigger home, or even a piece of investment property, as a trusted mortgage broker we’ll walk with you to help you with any FAQs or concerns you may have. We view our clients as family, and a big part of being a supportive family member is helping you work through all of this information to make the best decisions possible for you and your family. Besides providing you with a highly knowledgeable team, and an up-to-date mortgage calculator, we’ll also talk about all of these loan options, what loan limits we might need to consider, and other eligibility factors that will help you call that dream house your dream home. We’ll help you every step of the way, from pre-approval through underwriting, to the final close.
Ready to get in touch with a mortgage lender? Delmar Mortgage can help you find the best mortgage to suit your needs. Contact us today to discuss the best course of action for you and your home mortgage!
- Home Loan Options, Learning Center, Resource & Guides
- Oct 18, 2022
