Millions of Americans dream of obtaining homeownership. While the prospect of owning a home can seem difficult these days, there are mortgage loan options built to fit practically anyone’s financial situation (as long as you’re willing to do some groundwork first). If you’re interested in becoming a homeowner in 2023, here are five mortgage loan types that you should know about before you begin looking for your dream property:
1. Fixed-Rate Mortgages
If you’re looking for a mortgage loan that has the same interest rate and interest payment throughout your loan period, then you want to aim for a fixed-rate type mortgage loan. Finding the right type of mortgage can be difficult for many Americans, but the continuous predictability offered by the fixed-rate mortgage loan model has made its popularity increase over the last few decades. Especially as we deal with the effects of the current recession, the value of fixed-rate mortgages has increased. Knowing that your rates will not suddenly rise in the next few years, as you pay off your mortgage loan, can give you the peace of mind needed to finally become a homeowner in 2023. Additionally, the fact that your loan can fully amortize over the term of your mortgage will help you pay off your loan more effectively.
2. Government Loan Mortgages
If you have access to them, government-backed loan mortgages are some of the best America has to offer. Whether you’re using an FHA loan, a USDA loan, or a VA-backed loan, you’ll gain many financial advantages that can help you achieve your dream of homeownership. VA-backed loans are especially attractive, as they rarely require a down payment, and attorneys cannot legally charge veterans with many of the more ridiculously-priced fees that are typically associated with mortgage loans. Even if you’re using an FHA or USDA loan, you’ll have advantages when it comes to your down payment and interest rate amounts. Those who have lower credit scores, but are looking to build their upward mobility through home ownership, can find many things to love about government-backed loan mortgage offerings.
3. Jumbo Loan Mortgages
Jumbo loan mortgages are incredibly interesting and have many distinct features that set them apart from the other mortgage loan types we’re covering on this list. For example, you can get a loan that’s worth much more than your typical conforming loan standards in your area by using the jumbo mortgage loan model. That being said, these loans are often limited to those with a particularly high credit score and a lower DTI. For those who are looking to purchase an expensive home (even one that may normally be out of their price range), however, a jumbo mortgage loan is often the way to go. By consulting with a quality mortgage broker or loan officer in your area, you can quickly determine whether or not you could potentially qualify for a jumbo loan mortgage in 2023.
4. Conventional Mortgages
By far the most common type of mortgage, conventional mortgages are named as they are for a reason. The minimum credit score required for conventional mortgages tends to be around 620, but lower credit score applicants can sometimes acquire a conventional mortgage as well. These mortgages are typically offered by larger banks, and have a more straightforward application and payment process to them. The overall borrowing costs (after the initial fees that you pay) tend to be lower than many of the other loan types on this list, which makes conventional mortgages very attractive to many applicants. The lower down payment amounts (around 5% on average) associated with conventional mortgages help them to remain appealing as well.
5. Adjustable-Rate Mortgages
If you’re looking for something on the exact opposite end of a fixed-rate mortgage, an adjustable-rate mortgage is worth looking into. These mortgages are typically 30-year loans that have interest rates that change with the markets in the US. For those with a high-income stream, the pros of using an adjustable-rate mortgage are hard to overstate. For those with less certain financial futures, however, fixed-rate mortgages tend to be a safer bet. That being said, for many first-time homeowners, who are looking to simply buy a starter home that they will likely sell again down the line, the advantage of using an adjustable-rate mortgage increases. Finding a mortgage broker or loan officer that can help you find the right mortgage loan type for your unique financial situation is the ultimate goal, and this process can help you finally achieve your dreams of homeownership in 2023.