Did you know that the average home loan balance in the United States in 2020 was $208,185? Of course, you might not even have a mortgage yet but are looking into getting one, since the real estate market looks inviting.
Either way, it’s important to learn the different types of home loans available on the market, so you can make the best decision for yourself and your family. Your financial future depends on it.
Keep reading for a brief guide on the types of home mortgage loans available.
1. Low-down Home Loans
If you don’t have 20% for a downpayment on a new home, then you will want to search for a low-down home loan instead. These will allow you to put less than 20% down, and some will even allow you to skip the Private Mortgage Insurance (PMI) despite not putting 20% down.
2. Conventional Home Loans
In a conventional home loan setting, you are putting 20% as a downpayment. This is the typical kind of home loan that most homeowners end up with. Most financial institutions, like banks, credit unions, and more can help you get such a loan.
3. FHA Loans
If you have a low-to-average credit score, you will want to use an FHA loan to buy a home for yourself. Even if you have a credit score of 580, you can put 3.5% down and get an FHA loan. But you will need to purchase FHA mortgage insurance as a mandatory add-on.
4. Renovation or Rehabilitation Home Loans
Are you looking to do some renovation or rehabilitation on a home? Then perhaps you will need some additional cash to do so. That’s where a reno or rehab home loan comes into play.
5. Home Construction Loans
On the other hand, if you have a piece of land and you are looking to construct a new home on it, then a home construction loan is what you will search for. With this loan, you can use the bank’s money to purchase building materials, pay your contractors, and build a beautiful custom home perfect for you and your family.
6. Rental Loans
Are you a real estate investor looking to purchase some rental properties? With a rental loan, you can get a competitive rate on your investment property, so you don’t have to worry about getting approved for a traditional mortgage. View here for more information on a rental loan.
There Are Many Types of Home Loans Out There
Even though you might feel overwhelmed at first seeing the different types of home loans available on the market, it’s actually an advantage for you. This is because you can find a home loan that’s perfect for your unique situation and that can help you achieve your homeownership goals.
Don’t scramble anymore to fit your particular situation into a conventional mortgage setting. A smart homeowner knows better than that.
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