There are 4 basic types of mortgages. And they all depend on several factors such as income, credit score, down payment, geographical location, etc.

*DISCLAIMER* Each lender is different and Realtors are by no means professionals on this topic. The laws are constantly changing and you need to speak to a licensed mortgage officer to have accurate up-to -date information.  So PLEASE call your bank, lender, credit union, etc.

Conventional- This type of mortgage requires good credit and a decent down payment. Conventional appraisal guidelines are less strict. This type of loan carries PMI (Private Mortgage Insurance) but can be eliminated after 20% of the principle has been paid. Conventional mortgages are not backed by any government agency.

FHA-  This type of mortgage requires only 3.5% down. The appraisal guidelines have more regulations, and PMI (Private Mortgage Insurance) is also required. This is a 1.75% fee and carries for the life of the loan (Unlike Conventional Mortgages where the PMI can be eliminated). It’s a great opportunity for first time home buyers who may not have much of a nest egg or possibly struggling with credit. Concessions of up to 6% are allowed. Beware if your credit is too low, you may have to put more than 3.5% down, or pay points.  FHA mortgage’s are backed by the Federal Housing Agency.

VA- This is for active or retired military and their families. There is a o% down payment (unless you want to put more down).VA appraisal guidelines are similar to FHA, and you can ask for up to a 4% concession.

USDA-  The USDA will fund  mortgages for specific income ranges based on county, in rural areas and requires 0% down. Appraisal guidelines are similar to VA and FHA.  Concessions of up to 6% are allowed on this type of loan as well. Check the USDA website to search geographically for eligibility.

 

Factors that determine what kind of mortgage a person qualifies for are

  • Credit Score
  • Down Payment
  • Debt to Income Ratio
  • Type of Income
  • Length of Job History
  • Geographical Location
  • Military Experience

Mortgage Lenders cannot discriminate against a borrower based off any of the protected classes as per the Fair Housing Act.

 

There are other factors and sub types of mortgages such as Fixed vs Adjustable, Conforming and Non-Confirming, Balloon loans, etc. The 4 above descriptions provided are a crash course in Mortgage’s 101.  And please remember the mortgage industry is constantly evolving and changing, Realtors are not Mortgage Professionals, so please consult your local lender.