Types Of 30-Year Fixed-Rate Mortgages
Several types of home loans may be available to you, and each comes with pros and cons. Finding the right type of financing will help you better afford the home you want.
Here are some types of mortgages you might consider.
Conventional 30-Year Fixed-Rate Mortgage
Conventional loans are split into two categories: conforming and nonconforming loans. Conventional conforming loans meet the regulations for sale to Freddie Mac or Fannie Mae. Conventional nonconforming loans, on the other hand, don’t satisfy these guidelines.
Because of the diversity of rules, conventional loans don’t have a set list of qualification requirements. However, they usually have stricter rules than government-backed loans, such as FHA loans. Typically, you need a minimum credit score of 620 and debt-to-income ratio (DTI) of 50% or lower.
Conventional loan interest rates vary daily, but they’re usually slightly higher than rates on VA, FHA and USDA loans, which, again, are all government-insured.
FHA 30-Year Fixed-Rate Mortgage
The Federal Housing Administration, which works under the Department of Housing and Urban Development (HUD), guarantees FHA loans. So, the FHA protects the owners of your mortgage in case you default on the loan.
With some lenders, you can qualify for an FHA loan with a down payment as small as 3.5% and a credit score as low as 580. Your lender may also want evidence of steady employment and a debt-to-income ratio below 50%. While FHA loans tend to be fairly accessible, you’ll have to pay a mortgage insurance premium (MIP) if you finance your home purchase with an FHA mortgage.
VA 30-Year Fixed-Rate Mortgage
A VA loan is backed by the Department of Veterans Affairs (VA), so it poses less risk to mortgage investors. You’ll need a VA Certificate of Eligibility (COE) proving you qualify, though. Active-duty military members, veterans, surviving military spouses, and members of the National Guard and Army Reserve are all eligible if they meet certain requirements.
VA loans have generally lenient borrowing terms (including credit requirements), low interest rates and no minimum down payment requirement. Borrowers also don’t have to pay mortgage insurance. However, keep in mind that VA terms and rates vary among lenders.
Jumbo 30-Year Fixed-Rate Mortgage
Jumbo mortgages are non-conforming loans, meaning they can exceed the conforming loan limits set by the Federal Housing Finance Agency (FHFA) and not conform to the guidelines of Fannie Mae and Freddie Mac.
A conforming 30-year fixed mortgage can only offer a loan amount within the conforming loan limits. A 30-year fixed jumbo loan, however, can offer you more money if you’re able to qualify. Before approving a jumbo loan, a lender may require a home buyer to have additional cash reserves.
