The first thing most people consider when buying a home is how they are going to cover the payments. It’s not everyday that someone can make a cash offer on a home so the typical route is via financing. There are multiple ways to finance a home with a lender but the most common option is a conventional loan. The main difference between this loan other common ones like the FHA or Va loans is that is not backed by the government.
Types of Conventional Loans
A non-conforming loan usually has a larger limit than conforming loans and also can be known as jumbo mortgages. Since these loans are above the limits set by Fannie Mae and Freddie Mac, they don’t “conform” so they are called non-conforming loans, but they do vary based on county so it is important to research the limits in the area in which you intend to purchase.
If you are looking for a loan for a specific purpose such as investment, you might consider researching portfolio loans. Portfolio mortgages are quite a bit different than other conventional loans so their terms and features can work out for those that may not qualify for a typical loan. This means that if you happen to have stocks and bonds that can be kept in portfolio for the life of a loan, you may qualify for this type of loan even if you don’t qualify for a typical loan.
The last type of conventional loan you may want to consider f you have a lower credit score is a sub-prime mortgage. The interest rate and fees are usually higher, but they do give those with less than perfect credit a chance to still purchase a home. These come with special regulations created by the government but they are not backed by the government so they are still considered conventional loans.
Things To Consider
The primary consideration lenders consider when discussing your eligibility for a loan is your credit score and credit history as it’s going to determine your creditworthiness, which in turn is what is used to qualify you for a loan in the first place.
Many first time home buyers start looking at homes before they consider financing because they just want to see what’s out there. It’s a good idea to start thinking about a down payment as this time as well. If you are able to come up with a large down payment, you may have better options in regard to your interest rate to keep your monthly payments as low as possible.
The last thing to take into account when determining the type of loan that works best for you is why you are buying a home. If you are purchasing for the first time versus if you are looking for an investment, the type of loan is going to change based on your situation. If you want to stay in the home until it’s paid off, you’ll want to make sure your payments are consistent over the life of the loan as well unless you think you’ll be refinancing at some point.
Contact Us Today!
If you are considering buying a home have not settled on your financing options, we want to help you figure out the best options for you. Don’t hesitate to contact us at North Star Mortgage in Jacksonville, FL today!