Types Of Mortgage Loans That Are Available

When you begin shopping for you mortgage you may be overwhelmed by the variety of mortgage products available. A basic overview of available products will help demistify the process and make the process of choosing a lot easier.

Conventional Loans

These loans are the standard loan offered by most banks, lenders and mortgage brokers. To purchase a home you will usually need 20% down to qualify. Conventional loans don't exceed $417,000 in states such as California while others like Alaska and Hawaii do allow for higher mortgage loan limits.

Government or FHA Loans

For those that have limited means or have faced challenges with their credit an
FHA Mortgage Loan is a great alternative. Down payment requirements are less stringent. You may buy a home with as little as 3.5% down. Secondly reserve or cash on hand requirements are lenient or not required in some cases. The FHA insures the lender in case the borrower defaults and the lender has to sell the home at a loss. The FHA will help the lender recover a portion of the loss.

Jumbo Mortgage Loans

If you are borrowing more than a conforming loan allows then your loan is considered a jumbo mortgage loan. Jumbo loans have stricter requirements such as higher reserve and credit scores.

Hard Money Loans

If you are purchasing your first home its unlikely you'll need a hard money loan. These are loans that are made with no regards to your credit and are based on the equity of your home. There are programs that do allow you to purchase a home based on the future value of your home. This is primarily intended for rehab investors or house flipping.

By knowing some of the common terminology you will hear when shopping for a mortgage loan you will make better choices.