The Differences Between Common Mortgages

August 14, 2021 | Market News, The Differences Between Common Mortgages

With the housing market moving as fast as it is, it’s best to be prepared before going in and trying to make an offer on a home. Without at least pre-approval, you’re probably not going to be winning any bids, and these days there are plenty of bids for homes in Midlothian VA. Of course, you could always choose to build on your own land or purchase a plot in an existing community and let a quality company like LifeStyle Home Builders build your perfect home. However, you’ll still need a mortgage most likely, so here are some tips on the primary mortgages available.

Mortgage programs vary, with some wanting 20% down, while others only want 4% down. There are also special mortgages geared to various segments of society, which are always worth investigating. Each mortgage is influenced by factors such as your income, credit history and score, your employment, and your overall financial goals. It’s important to know how much you can afford before starting to make offers, and by getting pre-approval, you signal to sellers that lenders are willing to offer you a mortgage, which gives them confidence in accepting your offer.

Your standard mortgage is typically through a bank or other private lender organizations. This type of mortgage can be broken down further into conforming and non-conforming mortgages. The conforming one simply means it conforms to lending rules and standards set by the government in the form of Fannie Mae and Freddie Mac. There are rules regulating the loan amount, but lenders can be a bit more forgiving when dealing with credit scores. This is one of the most common types of mortgages.

A non-conforming loan doesn’t conform to the government rules and generally is more helpful for people who have owned a home previously but don’t meet current Freddie Mac or Fannie Mae guidelines. These loans may allow you to take out much bigger loans, but they also come with steeper interest rates because they also come with more risk for the lender.

For first-time homebuyers who may have trouble qualifying for a conventional loan, it’s worth looking into an FHA loan. This is a government-backed mortgage insured by the Federal Housing Administration. It typically requires lower minimum credit scores and sometimes offers lower down payments and interest rates. However, the amount of the loan may not be as high as conventional mortgages.

Another great loan option for those looking for low interest rates and down payments is a VA loan. As the name implies, a VA loan is available to veterans, service members, and certain military spouses. A VA loan is a zero-money-down mortgage, which makes it incredibly popular for those who may have decent credit scores but haven’t been able to save much for a down payment. VA loans are issued by private lenders, much like conventional loans, going through a mortgage company or bank, but they are guaranteed by the U.S. Department of Veterans Affairs. If you’ve served or are serving and are looking to buy a new home, definitely see if a VA loan could work to your benefit.

These are a few of the major loan options. There’s also a USDA mortgage for those looking to move to small, rural communities, but it won’t really be of use for those looking for homes in Midlothian VA. With its proximity to Richmond and the variety of amenities and entertainment, Midlothian definitely isn’t rural, but is highly appealing, especially if you choose to build your dream home with LifeStyle Home Builders in one of their family friendly communities. If you are considering a brand new home, rather than paying more than you want for a pre-existing home that doesn’t meet your needs, contact LifeStyle today to learn more about our home designs and communities.