Which Mortgage is Right For You?

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When it comes to mortgages, there’s no one-size-fits-all scenario. Every home buyer is different and has a unique set of financial circumstances that will dictate what type of home loan makes the right choice. Luckily, there are plenty of options as far as mortgages are concerned. Which option is right for you?

Conventional Mortgages

This is the most common type of mortgage and isn’t guaranteed by the federal government. Instead, it conforms to the guidelines set by Freddie Mac and Fannie Mae, and may either have a fixed or adjustable rate.

  • Down payment: 5% minimum (20% needed to avoid private mortgage insurance).
  • Qualifications: Minimum credit score of 620, and maximum 43% debt-to-income ratio.
  • Best suited for: Those with excellent credit to get most competitive interest rate.

FHA Mortgages

Unlike conventional mortgages, government-insured mortgages are backed by specific federal agencies. FHA mortgages (guaranteed by the Federal Housing Administration) make it easier for buyers to secure a mortgage with a lower down payment. 

  • Down payment: 3.5% minimum (borrower needs a credit score of at least 580).
  • Qualifications: Those who cannot come up with a 5% minimum down payment or have less-than-perfect credit.
  • Best suited for: First-time buyers or those who are don’t meet the qualifications for a conventional mortgage.

VA Mortgages

VA home loans are also guaranteed by the federal government and are backed by the Department of Veterans Affairs.

  • Down payment: No minimum required.
  • Qualifications: No minimum credit score required.
  • Bets suited for: Military veterans or family of military veterans.

USDA/RHS Mortgages

The United States Department of Agriculture (USDA) extends a mortgage program for suburban and rural borrowers who meet specific income requirements, and is managed by the Rural Housing Service (RHS).

  • Down payment: No minimum required
  • Qualifications: Income cannot be more than 115% of the adjusted area median income (AMI) which varies by county. 
  • Best suited for: Rural borrowers who have a steady yet modest income who are unable to secure a conventional mortgage.

Fixed-Rate Mortgages

These loans have the same interest rate over the whole repayment term, which means the amount of each monthly payment stays the same and will never change over the term of your mortgage.

  • Down payment: 5% minimum (for conventional mortgages).
  • Qualifications: Minimum credit score of 620, and maximum 43% debt-to-income ratio (for conventional mortgages).
  • Best suited for: First-time homebuyers; those who plan to stay in the home for the long-term; those who appreciate steady payments to make managing budgets easier.

Adjustable-Rate Mortgages

  • Down payment: 5% minimum (for conventional mortgages).
  • Qualifications: Minimum credit score of 620, and maximum 43% debt-to-income ratio (for conventional mortgages).
  • Best suited for: Those who plan to move or refinance in the short-term and want to take advantage of current low interest rates.