Loan Types and Options For You

With so many different loan options available, the mortgage process can often seem intimidating, especially for those of you that have never purchased a home before.

As an Owings Mills mortgage lender, I have experience with a variety of mortgage products and services and I am proud to be able to help all types of clients with their home financing needs.

Today, we will cover just a few of these mortgage loan options as I walk you through what each type of loan is and some of the qualifications that are required.

Conventional Loan

A conventional mortgage loan is a type of loan that is available to borrowers who wish to purchase a home. Unlike FHA, VA and USDA loans, conventional loans are not made available or secured by any government entities.

They are instead made available and guaranteed by private lenders or in some cases, the Federal National Mortgage Association, which is also known as Fannie Mae, or the Federal Home Loan Mortgage Corporation, which is also known as Freddie Mac.

Not all conventional loans are conforming loans, which are required to fall within certain dollar limits so not all conventional loans can be funded by Fannie Mae or Freddie Mac.

Conventional loans are the most common type of mortgages, representing over 60% of mortgage loans in the United States.

In order to qualify for a conventional loan, you must have good credit, a relatively low debt to income ratio, and a down payment of at least 20 percent.

FHA Loan

FHA loans are insured by a government entity – the Federal Housing Administration – which helps to protect lenders from the risk of default that is associated with lending mortgage funds to borrowers with lower credit and smaller down payments.

In order to issue an FHA loan, mortgage lenders must be approved by the FHA. Once this approval has taken place, loans issued by the lender are considered “FHA-Approved” and will be secured by the Federal Housing Administration.

To qualify for an FHA loan, borrowers can have average credit and a down payment as low as 3.5%.

New Construction Loan

New construction loans are quite different from Conventional and FHA loans. These types of loans have much shorter terms as the funds are used to pay for the construction of a new home.

Another loan is then taken out for a longer term after the construction of the home has been completed.

New construction loans typically carry higher interest rates as they are some of the riskiest loans for lenders. There is also much more involved with the approval process than with other types of home loans. With new construction, detailed construction plans must be produced, as well as a timeline for the conduction and proof of a licensed and qualified builder.

Similarly to conventional loans, new construction loans do require borrowers to have good credit and at least 20%, sometimes even more.

As an Owings Mills mortgage lender, I am able to customize any of these mortgage products to fit best with the needs of any individual client.

If you are looking to purchase a home in the local area and have questions about any of the loan options you see here, or one that you don’t, give me a call! I am always happy to answer any questions and I am excited to get started on your mortgage today!

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