Variety is the spice of life, and that holds true even in the mortgage industry. When it comes to mortgage types, it’s not just a 15 or 30-year fixed. You have options. Let’s talk about a few more mortgage types that are out there, including our three musketeers of specialty mortgages – VA, USDA and Jumbo.
First, and with the most honor, is the VA mortgage.
VA, for Veterans Administration, are mortgage loans backed by the Department of Veterans Affairs. A VA loan is only available to military service members and veterans. The huge draw to those who qualify for one is that it typically has a low interest rate, there’s no down payment required, no cap on how much you can borrow, and there will be no mortgage insurance tied to the loan.
There are some restrictions though — You can only get one for primary residences, so you can’t buy a vacation home in Maui, properties must be move-in ready, and there’s an upfront mandatory VA funding fee. This fee keeps the VA program going and it’s required on all affiliated purchase and refinance loans. The good news, though, is that the fee can be rolled into the loan amount, or for those with service-related disabilities, it can be waived entirely.
Interestingly enough, VA loans are not issued by the VA, but the agency does provide a guaranty on each loan — up to a quarter of the loan amount. The helps service members secure great terms and rates.
Next up is the out-in-the-open USDA mortgage.
Want to put down some roots in a more rural location? A USDA home loan may be the perfect option for you. It’s a mortgage that’s backed by the U.S. Department of Agriculture.
What’s so great about this mortgage type is that no down payment is required, the USDA guarantees all loans against default, plus there are a substantial amount of home improvement loans and grants available to you. If you qualify, you can borrow 100% of the appraised value of a home! You can even choose to build a new one with this mortgage option.
With a USDA mortgage, lenders can offer homebuyers more favorable loan terms. It’s great news for those who have limited resources to put toward a down payment and don’t want to live in a large urban area. Along with VA loans, this government-backed loan option is one of the last remaining $0 dollar down payment mortgage options out there.
Restrictions include limits on income levels and, of course, the property must fall within certain geographical areas, which are outside the city limits of major metropolitan centers.
On the other end of the spectrum, we have jumbo loans.
The max amount for most loans is $647,200. But what about clients looking for homes in more costly areas, like New York City or Silicon Valley? The jumbo loan is a great solution for them. Or, if you’re lucky enough to be shopping for a mansion, this could be the product for you.
A jumbo loan simply means that it’s a mortgage used to finance properties that are more costly than conventional ones. You’ll just need to make sure that you have a credit score of at least 700-720 and bring a down payment of 10% or more to the closing table.
If you’re left asking why the $647,200 dollar amount, it’s something that’s set by Fannie Mae and Freddie Mac. They’re the government-sponsored giants that buy most U.S. home loans and package them up for investors. Once a home loan price exceeds this amount, it’s no longer guaranteed by them, and is more risk-prone for a lender. Because of the risk, jumbo loans come with a variety of terms, like extensive documentation that proves your financial health and potentially higher interest rates, closing costs and fees, plus stricter underwriting criteria. But, if you have the funds, this may not really affect your bottom line.
What’s your take on these mortgage-type trios?
Whether it’s taking advantage of the perks that pair with serving in the military, luxe city living, or more rural and affordable housing, there are so many mortgage options open to you than you may have realized. And, if you’re interested in any of these, Homespire can help.
This is not an offer for a loan or any type of extension. Eligibility for a loan or extension of credit from Homespire Mortgage Corporation is subject to completion of a loan application, credit, income, and employment qualification, and meeting established underwriting criteria. Rates are subject to change without notice based on market conditions. See Loan Consultant for information on program income limits, buyer contribution, area median income, debt requirements, and other application details.