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What Types of Mortgage Loans Are There?

March 30, 2022 By Susan Paige Leave a Comment

Getting a mortgage is a big deal nowadays. There is the usual ideal of owning your own home, but it’s peppered with the knowledge today that you’ll have had to have worked hard and for a long time to get your mortgage.

It might well be the biggest purchase most of us make, so it’s important you understand what you’re buying. There are a lot of things to consider when getting a mortgage: the deposit, your credit score, your repayments and more, but among them is the different types of mortgages available to you. To make things easier, we’re going to break down the different types of mortgages available.

Why is it important?

Choosing your first home is only half the battle. Not only is affording a mortgage loan a big part of the struggle but becoming eligible for the loan is also something that needs heavy consideration.

To put it simply, choosing the right type of mortgage could save you thousands. It’s all to do with the interest. If you choose the right type of mortgage, you can save yourself a lot of money down the line in your monthly repayments.

You might have to also adhere to particular guidelines on certain mortgage loans. Changes in circumstance, down payment amount, or qualifying factors can dictate which type of mortgage you go for.

Conventional mortgages

The average conventional mortgage isn’t about to be backed by the federal government. If you have stable income, a good credit score and 3% down payment, you are likely to qualify for a conventional mortgage. There are variables from company to company, as it’s not government funded, like different rates of acceptable credit score, down payment rates, lender insurance etc.

You can avoid private mortgage insurance, which is designed to protect the lender, by putting 20% on a down payment, and extend your borrowing power by adding additional sources of income such as side businesses, co-borrowers’ income, social security, and child support and alimony. These elements are present in a lot of the other examples demonstrated below, but they are not necessary for some.

Conforming mortgage loans

Conforming mortgage loans differ from conventional loans due to the fact that the federal government limits the maximum loans by geographical area. Certain areas that are categorized by high cost like New York City or San Francisco have a higher loan limit than others, due to the fact that their home prices exceed the baseline loan limit, by sometimes as much as 115%.

Nonconforming mortgage loans

Nonconforming mortgage loans, or jumbo loans, as they’re sometimes known by, can’t be sold by most loan lenders due to underwriting guidelines or even the loan amount. Jumbo loans usually exceed conforming loan limits, and therefore need a little more work to prove you can afford it. A larger sum is a larger risk, so eligibility comes with extra steps, like a larger cash reserve, a requirement of a 10 or 20% down payment, and a higher credit score.

Government-insured FHA loans

FHA, or Federal Housing Administration, loans are created and backed by the government for the sake of housing low-to-moderate income buyers. It is especially attractive to first time buyers if they have been rejected for a conventional mortgage.

If you’re looking for an FHA loan, you won’t have to worry too much about your credit score, as FHA loans have less strict requirements there, however you will have to pay a mortgage insurance premium up front in order to protect the lender for the length of the loan.

Government-insured VA loans

VA loans are Veterans Affairs loans. These are government-issued mortgages designed to aid qualified military service members, veterans, and spouses of those.

There are a lot of benefits to these loans, for qualifying buyers, which include 100% of the loan amount financed without the need for a down payment, as well as better interest rates, lesser closing costs, and no insurance necessary to cover the lender.

You can be eligible for a VA loan if you are receiving benefits for a disability gained in service or would receive disability if you weren’t receiving retirement or active duty pay, are a surviving spouse of a vet who died in service, or a service member who received the Purple Heart.

Government-insured USDA loans

The US Department of Agriculture has created the USDA loan for the use of low-income buyers to find a home in rural areas across the country. They require almost no money as a down payment if you qualify and are a useful option if you have no money saved up or are not eligible for a conventional mortgage.

Understanding the different types of mortgage loans available, might open up a lot of opportunities for potential homebuyers. Depending on your circumstances, you might even be eligible for some government funded mortgages which could help you get your first home.

Filed Under: Home Tagged With: home buying, Mortgage Loans

8 Easy Low Cost Fixes to Help Your Home Sell Fast

June 8, 2020 By MelissaB Leave a Comment

Selling a home is not fun.  You have to pack, clean, and list your home for sale.  This process can be more stressful if you have to sell your home quickly because you have a new job in another area of the country or you’re buying a new home and don’t want to pay two mortgages.  Thankfully, there are 8 easy low cost fixes to help your home sell fast.

8 Easy Low Cost Fixes to Help Your Home Sell Fast

Declutter

Before you do anything, declutter, declutter, declutter.  Kitchen counters should be bare.  You should put extra furniture in storage.  Make your home look like a minimalist lives there.  By doing this, your house will look bigger, which can help buyers feel that the house is big enough for them and their possessions.

8 Easy Low Cost Fixes to Help Your Home Sell Fast
Photo by Lindy Baker on Unsplash

Besides decluttering, you also want to remove personal photos and decorations.  Buyers have a hard time imagining the house as theirs if you have to many of your own personal items.  Plus, your home will be photographed and listed on the internet.  Do you really want all of your personal family photos on the internet for anyone to see?  I know I don’t!

Deep Clean

After you’ve decluttered, deep clean.  If you’re not going to repaint, take a Magic Eraser, and make sure all of the scuff marks are off the trim and walls.  Clean the grout, power wash the deck, wipe down all of the walls and cabinets.  Dust and wash light fixtures.  If you have a neat freak friend, now is the time to invite her over so she can point out all the areas that need to be cleaned that you don’t notice because you live in the house.  If you have the money, consider hiring a cleaning team to do a spring clean of your house so that it’s pristine when potential buyers walk through.

Get Advice from the Realtor First

After you’ve done the basics of decluttering and cleaning, consider getting advice from a realtor.  The realtor will know your local market and can help guide you in any minor and major changes that you should make.

Paint Walls a Neutral Color

If you are going to paint the walls, and I recommend it because it makes the whole house look fresh, consider going with neutral colors like egg shell, beige or light gray.  Avoid dark colors or unique designs.

When my husband and I were searching for homes online, I didn’t even want to go look at the house that we ended up buying because the living room looked like it had ugly, old fashioned wallpaper on it.  When we did look at the house, we discovered it wasn’t really wallpaper, but instead a bad sponge painting job using tan, orange and brown.  If the living room would have been painted a neutral color, it would have looked much better online.

Make Minor Repairs

If you’ve lived in your house long enough, you likely have several minor repairs that need to be made.  In our house, we have some dry wall that needs to be patched, places where the paint is coming off, a doorbell that doesn’t work, etc.  Take all of those small repairs and have them fixed.  Your home will look better when you list it, and potential buyers will feel that you’ve done a good job taking care of your home.

Buy a Home Warranty Now

If you don’t have a home warranty, consider buying one now.  Then, when you have a potential buyer and a home inspection, if anything major is found, you’ll be able to offset the cost to repair or fix with the home warranty.  When you close, the new homeowners can buy the warranty from you if they’d like.

Price to Sell

If you’re in a hurry to sell your home, make sure you price it competitively.  Now is not the time to price it a little bit high to see if you can get a greater profit.  If time is of the essence, price it around the same price of comparable properties in your area or even price it a little bit lower.  Sure, you won’t make as much money. However,  in the long run, you can save money overall because you won’t have to pay the mortgage for a house you no longer live in that is still on the market.

My husband and I were in the housing market about five years ago.  We saw many houses that were priced too high.  Those houses had had numerous price reductions.  I immediately thought the sellers were desperate and that I could negotiate with them even further.  Other buyers might think something is wrong with the property.

It is better to start with a competitive price and garner interest than to start too high and keep reducing the price.

Allow All of the Showings

8 Easy Low Cost Fixes to Help You Sell Your House Fast
Photo by Artem Beliaikin on Unsplash

One of the most difficult parts of selling a house, especially if you have kids, is to leave your home so real estate agents can show it.  However, if you can try to keep your home show ready, you’ll be able to leave at a moment’s notice.  Try to be flexible and agree to showings with only an hour’s notice.  The more people you can get through your front door, the more potential buyers you have.

A family friend recently had to sell her home quickly because her husband had gotten a job in another state.  They only had one month to sell.  Even though they had three young children, they were determined to sell quickly.  They left the house sometimes two to four times a day for showings.  However, they sold the house in just two short weeks!

Final Thoughts

These 8 easy low cost fixes to help your home sell fast tasks don’t cost much money.  However, they can have a serious impact on how long your house is on the market and how much it will sell for.

If you’ve recently sold or bought your home, what else would you add to this list?

MelissaB
MelissaB

Melissa is a writer and virtual assistant. She earned her Master’s from Southern Illinois University, and her Bachelor’s in English from the University of Michigan. When she’s not working, you can find her homeschooling her kids, reading a good book, or cooking. She resides in New York, where she loves the natural beauty of the area.

www.momsplans.com/

Filed Under: Frugality, Home, Saving Tagged With: home buying, home warranty, selling a home

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