Taking out a mortgage is a huge financial decision. Not only are you borrowing a large amount of money, but you’re also committing to repaying that debt over a long period.
With so much at stake, it’s important to understand all the different types of mortgages available to you and to select the one that best suits your needs. Since every home buyer has their individual needs when it comes to securing a mortgage, there’s no one-size-fits-all solution. Therefore, in this guide, we’ll go over the different types of mortgages and explain the key differences between them, so you can make an informed decision when it comes time to apply for a mortgage.
A physician mortgage is a type of mortgage specifically designed for doctors and other medical professionals. Since most doctors have high levels of student debt and may not have a lot of money saved up for a down payment, these loans offer special benefits.
Getting a physician mortgage loan usually requires no down payment at all. If you do have to make a down payment, it’s often possible to finance it through the loan itself. In other words, you can add the cost of your down payment into the overall mortgage amount and spread it out over the life of the loan.
Physician mortgage rates are also typically lower than those for conventional mortgages. That’s because lenders view doctors as low-risk borrowers who are likely to repay their debts on time. Keep in mind that it might be possible to negotiate for even better terms, depending on your credit score, financial history, and other factors. So if you’re a doctor or other medical professional, be sure to ask your lender about these options.
An FHA mortgage is a loan that’s insured by the Federal Housing Administration (FHA). This type of loan is an attractive option for first-time homebuyers because it doesn’t require a large down payment. Buyers can put down as little as 3.5% of the purchase price of the home. FHA mortgages are also available to borrowers with less-than-perfect credit, you need a credit score of at least 580 to qualify.
The main downside of FHA loans is that they require mortgage insurance. This is an extra fee that’s added to your monthly payment, and it’s intended to protect the lender in case you default on your loan. Mortgage insurance can add quite a bit to your monthly payments, so it’s important to factor this cost into your budget before you apply for an FHA mortgage.
A VA mortgage is a home loan that’s guaranteed by the U.S. Department of Veterans Affairs (VA). This type of loan is available only to eligible veterans, active-duty service members, and certain reservists and National Guard members. If you qualify, you’ll be able to get a VA mortgage with no down payment and without the need for private mortgage insurance (PMI).
VA mortgages are offered through both private lenders and the VA itself. If you’re interested in a VA mortgage, your first step should be to contact the VA and get pre-qualified. This will give you an estimate of how much you can borrow and help you narrow down your options. Once you’ve been pre-qualified, you can compare different lenders’ offers to find the best terms and conditions for your situation.
A conventional mortgage is a home loan that’s not insured by the government. These loans are available from private lenders, including banks, credit unions, and online lenders. You’ll typically need good credit to qualify for a conventional mortgage, and you’ll also need to come up with a down payment of at least 3%. While conventional mortgages aren’t backed by the government, they do have some government oversight.
One of the biggest advantages of a conventional mortgage is that they often come with lower interest rates than other types of loans. That’s because conventional loans are seen as being less risky for lenders. If you have good credit and a strong financial history, you may be able to qualify for a conventional mortgage with a competitive interest rate.
Adjustable-Rate Mortgage (ARM)
An adjustable-rate mortgage (ARM) is a type of home loan that has an interest rate that can change over time. These loans are typically available with a fixed interest rate for an initial period of 5, 7, or 10 years. After that, the interest rate will adjust periodically, usually once per year. The new interest rate will be based on prevailing market rates at the time of the adjustment.
With an ARM, your monthly payments could go up or down depending on changes in the market. That makes them a bit riskier than other types of loans, but they can also offer some advantages. The biggest benefit is that you’ll typically qualify for a lower interest rate than you would with a fixed-rate mortgage. This can save you quite a bit of money over the life of the loan. So if you’re comfortable with the risk, an ARM could be a good option for you.
As you can see, whether you are looking for a low monthly payment, a smaller down payment, or a lower interest rate, there is a mortgage out there that can fit your needs. It’s important to do your research and compare different types of loans before you decide which one is right for you. But with a little bit of planning, you should be able to find the perfect mortgage to help you achieve your homeownership goals.