What Type of Home Loan is Right for You?
Penned by Allison Larson, Novus Home Mortgage.
We hear and read a lot of muddled information about different types of mortgages, but how do you decide what is right for you? Here is a quick break down and pros and cons of the major options.
Conventional Loan
A conventional mortgage is a home that is not insured by a government agency. This is the standard, most common type of mortgage people take out. The maximum loan amount in Minnesota for this loan is $548,000 and if you are putting less than 20% down you will pay private mortgage insurance.
Cliff Notes:
Can be used for a primary home, second home or an investment property
Overall costs of this mortgage and interest rates tend to be lower
You can get rid of mortgage insurance once you have 20% equity
Can put as little as 3% down
Ideal loan for borrowers with strong credit and stable income
Jumbo Loan
Jumbo mortgage are conventional loans that are over a $548,000 loan amount in MN. They have more strict guidelines than a standard conventional loan due to the amount that is being borrowed.
Cliff Notes:
Interest rates tend to be competitive with other conventional loans
Down payment is typically 10-20%
Debt-to-Income Ratios and credit requirements are more strict
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FHA/VA/USDA Loans
These are all government backed loans that were created to help more Americans become homeowners. The most common of these is FHA Loans as you do not need to be a veteran or purchasing in a rural area to utilize it.
Cliff Notes:
Can have a credit score down to 580
Only need 3.5% down payment
FHA Loans have two mortgage insurance premiums, one financed into your loan amount and the other is paid monthly. No matter what your credit score, the premium is the same, making this a more affordable option for some borrowers.
Construction Loans
Yes, a construction loan is just that, for doing construction! You may utilize a construction loan if you are building on a lot or if you are doing a full remodel down to the bones of the house. Although building a home takes more time, the loan process is still very cost effective.
Cliff Notes:
You will close on a ‘construction’ loan and then re-structure the construction loan into a normal 30-year fixed mortgage, or whatever you prefer!
10% Down is required upon the initial closing of the construction loan
Credit score above 700 is needed
This is a very abbreviated and high-level view of mortgage options. To know what the best fit for you would be, connect with a mortgage lender to review your options!
Allison Shaw of Novus Home Mortgage
Allison has a social character that drives her to build such a strong foundation with her clients from day one. She believes fostering current relationships, while continuously extending a hand to new affiliations is what keeps her professional life successful and exciting. By creating an environment where people feel comfortable asking questions and expressing their housing goals, she’s able to cater her methods to each unique individual.
Allison leads the Novus Home Mortgage team of local mortgage experts, and is always open to connect and provide advice Follow along with @mplsmademortgage on Instagram, or at allisonlarsonloans.com.
Investor // Landlord and DIYer // Realtor // Business Consultant // Globe Trotter // Converting Vegan.
