{"id":14668,"date":"2024-08-21T21:30:56","date_gmt":"2024-08-21T21:30:56","guid":{"rendered":"https:\/\/testv78.demowebsitelinks.com\/Integrity-Capital\/?page_id=14668"},"modified":"2024-08-21T21:35:56","modified_gmt":"2024-08-21T21:35:56","slug":"what-type-of-mortgage-should-i-get","status":"publish","type":"page","link":"https:\/\/testv78.demowebsitelinks.com\/Integrity-Capital\/what-type-of-mortgage-should-i-get\/","title":{"rendered":"What Type of Mortgage Should I Get?"},"content":{"rendered":"\t\t<div data-elementor-type=\"wp-page\" data-elementor-id=\"14668\" class=\"elementor elementor-14668\" data-elementor-post-type=\"page\">\n\t\t\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-9440028 md-bg-hidden elementor-section-stretched elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"9440028\" data-element_type=\"section\" data-settings=\"{&quot;background_background&quot;:&quot;classic&quot;,&quot;stretch_section&quot;:&quot;section-stretched&quot;}\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-c1360cc\" data-id=\"c1360cc\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-4c03c4d elementor-invisible elementor-widget elementor-widget-text-editor\" data-id=\"4c03c4d\" data-element_type=\"widget\" data-settings=\"{&quot;_animation&quot;:&quot;fadeInUp&quot;}\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t<p><strong>What Type of Mortgage Should I Get?<\/strong><\/p><p><em>Learn the best type of mortgage for you<\/em><\/p><p><em>By <\/em><a href=\"https:\/\/www.thebalancemoney.com\/erin-gobler-5087586\"><em>Erin Gobler<\/em><\/a><\/p><p>Imagine that you\u2019ve decided to buy a home and are ready to get preapproved for a mortgage. But once you start researching, you find there are many different types of home loans to choose from, each with its own requirements, benefits, and downsides. How can you decide which type of loan is best for you?<\/p><p>Before you take out a mortgage, it\u2019s important to understand the different options available and how they may work with your situation. We\u2019ll explain the different types of mortgages and what factors to consider when choosing your best option.<\/p><p><strong>Key Takeaways<\/strong><\/p><ul><li>There are many different types of mortgages available, each of which is best suited to a particular situation and type of borrower.<\/li><li>Conventional loans include fixed-rate loans, adjustable-rate mortgages (ARMs), and non-conforming (also known as \u201cjumbo\u201d) loans.<\/li><li>The government-backed loans available include Federal Housing Administration (FHA) loans, Department of Veterans Affairs (VA) loans, and U.S. Department of Agriculture (USDA) loans.<\/li><li>The best type of mortgage for you depends on your financial situation, the home you want to buy, your preferred interest-rate type and loan term, and more.<\/li><\/ul><p><strong>What To Consider While Shopping for a Mortgage<\/strong><\/p><p>When you start shopping for a mortgage, you might be surprised by how many options you have. In addition to the standard 30-year fixed-rate loan that most borrowers know about, you\u2019ll also have several other\u00a0<a href=\"https:\/\/www.thebalancemoney.com\/types-of-mortgage-loans-for-homebuyers-5215180\">types of mortgages to choose from<\/a>.<\/p><p>With so many options, it\u2019s easy to get mired in confusion about the right type of loan for you. Here are a few things to consider while shopping for a mortgage and working to choose the right one for you.<\/p><ol><li><strong> Your Financial Situation<\/strong><\/li><\/ol><p>Your personal financial situation will be one of the most important factors in deciding which type of mortgage is right for you. Here are a few aspects of your personal finances that will play a role in what mortgages you should consider:<\/p><ul><li><strong>Credit score<\/strong>: A conventional loan generally requires a\u00a0<a href=\"https:\/\/www.thebalancemoney.com\/how-to-read-your-credit-score-960488\">credit score<\/a>\u00a0of at least 620, but certain government-backed loans are available to borrowers with lower credit.<sup>1<\/sup><\/li><li><strong>Down-payment size<\/strong>: Each type of loan has its own\u00a0<a href=\"https:\/\/www.thebalancemoney.com\/choosing-a-down-payment-315602\">down-payment requirements<\/a>. Certain types of mortgages, including both conventional and\u00a0<a href=\"https:\/\/www.thebalancemoney.com\/fha-loan-basics-315656\">FHA loans<\/a>, require a down payment, while VA and USDA loans don\u2019t.<\/li><li><strong>Income<\/strong>:<strong>\u00a0<\/strong>Most mortgages don\u2019t have a minimum or maximum income requirement. Instead, your eligibility depends on your income in relation to the monthly payment of the mortgage. However, certain government-backed loans do require that borrowers fall under a certain income limit.<sup>2<\/sup><\/li><\/ul><ol start=\"2\"><li><strong> The Home You Want To Buy<\/strong><\/li><\/ol><p>The location and price of the\u00a0<a href=\"https:\/\/www.thebalancemoney.com\/how-to-buy-your-first-home-2385826\">home you want to buy<\/a>\u00a0may dictate what type of mortgage you can choose. For example, if you\u2019re looking at a home that\u2019s very expensive for your area, you may be limited to a\u00a0<a href=\"https:\/\/www.thebalancemoney.com\/what-you-need-to-know-about-jumbo-loans-4155160\">jumbo loan<\/a>, which exceeds the baseline conforming loan limit set by the federal government.<sup>3<\/sup>\u00a0If you\u2019re considering a U.S. Department of Agriculture (USDA) loan, you\u2019ll only qualify if the home you purchase is in an eligible rural area.<\/p><ol start=\"3\"><li><strong> The Type of Interest Rate You Want<\/strong><\/li><\/ol><p>Depending on the types of mortgages you\u2019re eligible for, you may be able to opt between a\u00a0<a href=\"https:\/\/www.thebalancemoney.com\/differences-between-arm-and-fixed-rate-mortgages-4174358\">fixed-rate or adjustable-rate mortgage<\/a>. We\u2019ll explain these in greater detail below, but know that each option has its pros and cons. Fixed-rate loans are more popular and generally lower risk. However, ARMs may be preferable for certain borrowers who can accept a bit more risk, especially if they plan to be in the home for a shorter period.<\/p><ol start=\"4\"><li><strong> Your Preferred Loan Term<\/strong><\/li><\/ol><p>A\u00a0<a href=\"https:\/\/www.thebalancemoney.com\/15-year-vs-30-year-mortgage-comparison-4160097\">30-year loan<\/a>\u00a0may be the most popular option for a mortgage, but it\u2019s not the only choice. Many borrowers choose mortgage terms as low as 15 years. Those loans often come with lower interest rates and the ability to pay off your mortgage more quickly, but you\u2019re also stuck with higher monthly payments during the life of the loan.<\/p><ol start=\"5\"><li><strong> Your Extenuating Circumstances<\/strong><\/li><\/ol><p>Depending on your personal situation, you may have more options when choosing a home loan. For example, homebuyers who have served in the military or those living in rural areas have access to certain government-backed loans.<\/p><ol start=\"6\"><li><strong> Loan Costs and Fees<\/strong><\/li><\/ol><p>Depending on your situation, you may qualify for several different types of loans. If that\u2019s the case, it\u2019s important to consider the costs and fees associated with each type. Even a small difference in the\u00a0<a href=\"https:\/\/www.thebalancemoney.com\/what-is-a-mortgage-interest-rate-4584864\">interest rate<\/a>\u00a0of a loan can equate to tens of thousands of dollars over the entire loan term. And while some loans may offer upfront benefits, they may be more costly in the long run. If you\u2019re weighing your options between a couple of different loans, run the numbers.<\/p><p><strong>Conventional Fixed-Rate Mortgage<\/strong><\/p><p>A conventional fixed-rate mortgage is the most common type of home loan. A\u00a0<a href=\"https:\/\/www.thebalancemoney.com\/what-is-a-conventional-loan-1798441\">conventional loan<\/a>\u00a0is one that isn\u2019t backed by a government entity.<sup>4<\/sup>\u00a0The fixed-rate means you qualify for a certain interest rate when you take out the mortgage, then keep that fixed rate and make fixed payments throughout the entire life of the loan.<\/p><p>Conventional mortgages can be either 15- or 30-year loans, with 30-year fixed-rate loans being the most common type. While 15-year fixed-rate mortgages require higher monthly payments, they also tend to have lower interest rates and allow you to pay off your loan more quickly.<sup>5<\/sup><\/p><p><strong>Note:\u00a0 <\/strong>While the terms \u201cconventional\u201d and \u201cconforming\u201d are often used interchangeably when describing mortgages, they aren\u2019t the same thing. A conventional mortgage is one that isn\u2019t backed by a government agency, while a\u00a0<a href=\"https:\/\/www.thebalancemoney.com\/what-is-a-conforming-loan-4684319\">conforming loan<\/a>\u00a0is one that meets the loan limits set by the Federal Housing Finance Agency (FHFA).<\/p><p><strong>Key Features<\/strong><\/p><ul><li><strong>Minimum down payment<\/strong>: 3%<sup>6<\/sup><\/li><li><strong>Minimum credit score<\/strong>: 620<sup>1<\/sup><\/li><li><strong>Debt-to-income (DTI) ratio<\/strong>: 36% to 50%, depending on the underwriting and credit score<sup>7<\/sup><\/li><li><strong>Mortgage insurance<\/strong>:\u00a0<a href=\"https:\/\/www.thebalancemoney.com\/how-much-is-private-mortgage-insurance-5208421\">Private mortgage insurance (PMI)<\/a>\u00a0with less than 20% equity<sup>8<\/sup><\/li><li><strong>Loan limits<\/strong>: $647,200 to $970,800, depending on location<sup>3<\/sup><\/li><li><strong>Other requirements<\/strong>: None<\/li><\/ul><p><strong>\u00a0<\/strong><\/p><p><strong>Pros and Cons<\/strong><\/p><p><strong>Pros<\/strong><\/p><ul><li>Predictable interest rate and payment<\/li><li>Low down-payment requirement<\/li><li>Lower costs than FHA loans<\/li><\/ul><p><strong>Cons<\/strong><\/p><ul><li>More difficult to qualify<\/li><li>Higher interest rate than an ARM<\/li><li>PMI required for less than 20% down<\/li><\/ul><p><strong>Pros Explained<\/strong><\/p><ul><li><strong>Predictable interest rate and payment<\/strong>:<strong>\u00a0<\/strong>Due to the fixed interest rate, a conventional fixed-rate mortgage has the same payment for the entire loan term.<\/li><li><strong>Low down-payment requirement<\/strong>:<strong>\u00a0<\/strong>This type of loan only requires 3% down, while certain other loans may require more for the down payment.<\/li><li><strong>Lower costs than FHA loans<\/strong>: When you account for the interest rate, mortgage insurance, and other costs, conventional loans are often cheaper than some government-backed loans.<\/li><\/ul><p><strong>Cons Explained<\/strong><\/p><ul><li><strong>More difficult to qualify<\/strong>: Due to the higher credit-score requirement and other factors, a conventional loan may be more difficult to qualify for than a government-backed loan.<\/li><li><strong>Higher interest rate than an ARM<\/strong>: While they may offer more predictability, fixed-rate loans often have higher starting rates than adjustable-rate loans.<sup>9<\/sup><\/li><li><strong>PMI required for less than 20% down<\/strong>: While you can put down as little as 3% on a conventional fixed-rate loan, you\u2019ll pay PMI as long as you have less than 20% equity.<\/li><\/ul><p><strong>When a Conventional Fixed-Rate Mortgage Works Best<\/strong><\/p><p>A conventional fixed-rate mortgage is best for borrowers who can qualify for the stricter loan requirements, such as the higher credit score and the down-payment requirement. It\u2019s also best for those who want the predictability of the same monthly payment for the entire loan term.<\/p><p><strong>Conventional Adjustable-Rate Mortgage<\/strong><\/p><p>A conventional\u00a0<a href=\"https:\/\/www.thebalancemoney.com\/is-an-adjustable-rate-mortgage-arm-is-right-for-you-1797823\">ARM<\/a>\u00a0shares many of the same characteristics as a conventional fixed-rate mortgage. This type of loan isn&#8217;t backed by a government agency and can come in either 15- or 30-year loan terms.<\/p><p>The key difference between the two loans is that with an ARM, you don&#8217;t have a fixed interest rate for the life of the loan. Instead, your loan rate can change throughout the loan term based on the index it&#8217;s tied to. An ARM has a few important components:<sup>10<\/sup><\/p><ul><li><strong>Initial rate<\/strong>:<strong>\u00a0<\/strong>When you borrow your ARM, you&#8217;ll have a starting interest rate, which is often lower than the rate you could get on a conventional fixed-rate loan.<\/li><li><strong>Initial rate period<\/strong>: An ARM allows you to lock in your initial rate for a set period, often up to ten years. During this time, your interest rate won&#8217;t change.<\/li><li><strong>Adjustment period<\/strong>: Once you&#8217;re past the initial rate period, the adjustment period is how often your interest rate can change. The adjustment period can range from every month to every five years.<\/li><li><strong>Index<\/strong>:<strong>\u00a0<\/strong>Each ARM is tied to a different rate index to determine its interest rate. The rate on your ARM is generally the index rate plus a certain\u00a0<a href=\"https:\/\/www.thebalancemoney.com\/what-is-arm-margin-5200832\">margin<\/a>.<\/li><li><strong>Rate and payment caps<\/strong>: Your rate and payment can increase on an ARM, but there will be a cap on how much your rate and payment can increase from their initial points.<\/li><\/ul><p><strong>Key Features<\/strong><\/p><ul><li><strong>Minimum down payment<\/strong>: 5%<sup>6<\/sup><\/li><li><strong>Minimum credit score<\/strong>: 620<sup>1<\/sup><\/li><li><strong>DTI ratio<\/strong>: 36% to 50%, depending on the underwriting and credit score<sup>7<\/sup><\/li><li><strong>Mortgage insurance<\/strong>: Private mortgage insurance (PMI) with less than 20% equity<sup>8<\/sup><\/li><li><strong>Loan limits<\/strong>: $647,200 to $970,800, depending on location<sup>3<\/sup><\/li><li><strong>Other requirements<\/strong>: None<\/li><\/ul><p><strong>Pros and Cons<\/strong><\/p><p><strong>Pros<\/strong><\/p><ul><li>Lower initial interest rate<\/li><li>Among lower down payments required<\/li><li>Lower costs than FHA loans<\/li><\/ul><p><strong>Cons<\/strong><\/p><ul><li>Unpredictable interest rate and payment<\/li><li>More difficult to qualify<\/li><li>PMI required for less than 20% down<\/li><\/ul><p><strong>Pros Explained<\/strong><\/p><ul><li><strong>Lower initial interest rate<\/strong>: ARMs have a lower initial interest rate than fixed-rate mortgages.<\/li><li><strong>Among lower down payments required<\/strong>: An ARM requires as little as 5% down, which is lower than some other types of mortgages.<\/li><li><strong>Lower costs than FHA loans<\/strong>: Conventional loans, including ARMs, are generally cheaper than FHA loans.<\/li><\/ul><p><strong>Cons Explained<\/strong><\/p><ul><li><strong>Unpredictable interest rate and payment<\/strong>: Due to the adjustable rate, ARM payments can be unpredictable. If the rate of the index or loan is tied to increases, your interest rate and payment will increase.<sup>5<\/sup><\/li><li><strong>More difficult to qualify<\/strong>: Like a fixed-rate conventional loan, an ARM is more difficult to qualify for than certain government-backed loans.<\/li><li><strong>PMI required for less than 20% down<\/strong>:<strong>\u00a0<\/strong>Like a fixed-rate conventional loan, an ARM requires PMI as long as you have less than 20% equity in the home.<\/li><\/ul><p><strong>When a Conventional Adjustable-Rate Mortgage Works Best<\/strong><\/p><p>An ARM is best for borrowers who can qualify for the stricter loan requirements of a conventional mortgage and who want to take advantage of the lower starting interest rate when compared with a fixed-rate loan. Due to the interest rate and payment risk, an ARM is ideal for those with a larger appetite for risk or those who only plan to stay in the home for less than the initial rate period.<\/p><p><strong>FHA Mortgage<\/strong><\/p><p>An\u00a0<a href=\"https:\/\/www.thebalancemoney.com\/fha-loan-basics-315656\">FHA loan<\/a>\u00a0is one that\u2019s backed by the Federal Housing Administration. This type of loan makes it easier for borrowers with poor credit to buy homes. Because these loans are backed by the FHA, they pose less risk for the lender, meaning borrowers don\u2019t have to meet such strict eligibility requirements as conventional loans.<\/p><p><strong>Key Features<\/strong><\/p><ul><li><strong>Minimum down payment<\/strong>: 3.5% for a credit score of 580, 10% for a credit score of 500-570<sup>11<\/sup><\/li><li><strong>Minimum credit score<\/strong>: 500-580<sup>11<\/sup><\/li><li><strong>DTI ratio<\/strong>: 43%<sup>11<\/sup><\/li><li><strong>Mortgage insurance<\/strong>: Upfront mortgage insurance of 1.75%, monthly mortgage insurance premium (MIP)<sup>11<\/sup><\/li><li><strong>Loan limits<\/strong>: $420,680 to $970,800, depending on your location<\/li><li><strong>Other requirements<\/strong>: Homes must meet certain building\u00a0<a href=\"https:\/\/www.thebalancemoney.com\/fha-repair-requirements-and-guidelines-for-fha-loans-1798426\">standards related to safety<\/a>, soundness, and security.<\/li><\/ul><p><strong>Pros and Cons<\/strong><\/p><p><strong>Pros<\/strong><\/p><ul><li>Lower credit-score requirements<\/li><li>Flexible DTI requirement<\/li><li>Gift funds allowed for the down payment<\/li><\/ul><p><strong>Cons<\/strong><\/p><ul><li>Upfront and ongoing mortgage insurance<\/li><li>Higher down-payment requirement<\/li><li>More expensive than conventional loans<\/li><\/ul><p><strong>Pros Explained<\/strong><\/p><ul><li><strong>Lower credit-score requirements<\/strong>: You can qualify for an FHA loan with a credit score as low as 500, which is considerably lower than the minimum for a conventional loan.<\/li><li><strong>Flexible DTI requirement<\/strong>: You can exceed the 43% DTI if certain compensating factors are met, including having a history of on-time housing payments, a large down payment, sizable savings, and more.<sup>12<\/sup><\/li><li><strong>Gift funds allowed for the down payment<\/strong>:<strong>\u00a0<\/strong>The Department of Housing and Urban Development (HUD) explicitly allows FHA borrowers to use gifted funds for the down payment.<sup>13<\/sup><\/li><\/ul><p><strong>Cons Explained<\/strong><\/p><ul><li><strong>Upfront and ongoing mortgage insurance<\/strong>: When you borrow an FHA loan, you\u2019ll pay an upfront mortgage insurance premium (MIP) of 1.75% of the loan amount, as well as ongoing MIP throughout the loan term.<\/li><li><strong>Higher down-payment requirement<\/strong>:<strong>\u00a0<\/strong>The down-payment requirement for an FHA loan is higher than that of a conventional loan or another government-backed loan, especially if your credit score is below 580.<\/li><li><strong>More expensive than conventional loans<\/strong>:<strong>\u00a0<\/strong>FHA loans are generally more expensive than conventional loans when you account for interest, mortgage insurance, etc.<\/li><\/ul><p><strong>When an FHA Mortgage Works Best<\/strong><\/p><p>An FHA mortgage might be the right choice for someone who wants to buy a home but doesn\u2019t have the credit score to qualify for a conventional mortgage. Keep in mind, you\u2019ll still have to provide a down payment and meet DTI requirements.<\/p><p><strong>VA Mortgage<\/strong><\/p><p>A\u00a0<a href=\"https:\/\/www.thebalancemoney.com\/benefits-va-home-loan-5202224\">VA mortgage<\/a>\u00a0is a home loan provided by a private lender and backed by the U.S. Department of Veterans Affairs. These loans are available to current and former service members who have served for a certain number of months or were discharged for a service-connected disability. These loans provide a cheap and flexible mortgage option to military families.<\/p><p><strong>Key Features<\/strong><\/p><ul><li><strong>Minimum down payment<\/strong>: None<sup>14<\/sup><\/li><li><strong>Minimum credit score<\/strong>: None<sup>15<\/sup><\/li><li><strong>DTI ratio<\/strong>: 41%<sup>16<\/sup><\/li><li><strong>Mortgage insurance<\/strong>: None<sup>14<\/sup><\/li><li><strong>Loan limits<\/strong>: None<sup>17<\/sup><\/li><li><strong>Other requirements<\/strong>: Minimum military service requirements; homes must meet certain standards and be safe, sound, and sanitary.<sup>18<\/sup><\/li><\/ul><p><strong>Pros and Cons<\/strong><\/p><p><strong>Pros<\/strong><\/p><ul><li>Lower eligibility requirements<\/li><li>Cheaper than other loan options<\/li><li>Can be used multiple times<\/li><\/ul><p><strong>Cons<\/strong><\/p><ul><li>VA funding fee<\/li><li>Not available to all borrowers<\/li><\/ul><p><strong>Pros Explained<\/strong><\/p><ul><li><strong>Lower eligibility requirements<\/strong>: A VA loan is easier to qualify for in terms of the required credit score and down payment.<\/li><li><strong>Cheaper than other loan options<\/strong>: Due to the competitive interest rates and no mortgage insurance, a VA loan can be cheaper than other loan options.<\/li><li><strong>Can be used multiple times:<\/strong> Unlike certain military benefits, you aren\u2019t limited to using a VA loan once. It\u2019s a lifetime benefit you can use each time you buy a home.<\/li><\/ul><p><strong>Cons Explained<\/strong><\/p><ul><li><strong>VA funding fee<\/strong>:<strong>\u00a0<\/strong>While there is no mortgage insurance, you will have to pay a VA funding fee, which is based on your down payment and whether it\u2019s your first VA loan.<sup>19<\/sup><\/li><li><strong>Not available to all borrowers<\/strong>: Most borrowers won\u2019t be eligible for a VA loan because they are only available to eligible current and former military service members and surviving spouses.<\/li><\/ul><p><strong>When a VA Mortgage Works Best<\/strong><\/p><p>A VA mortgage might be the right choice for any current or former military service member buying a home. Due to the low eligibility requirements, competitive interest rates, and lack of mortgage insurance, you may find it\u2019s a better alternative to any other mortgage you may qualify for.<\/p><p><strong>USDA Mortgage<\/strong><\/p><p>A\u00a0<a href=\"https:\/\/www.thebalancemoney.com\/how-to-get-a-mortgage-with-a-usda-loan-4778990\">USDA mortgage<\/a>\u00a0is one that\u2019s either guaranteed by or borrowed directly from the USDA\u2019s Rural Development department. These loans are available to low- and moderate-income borrowers in eligible areas defined as rural, helping individuals to obtain decent, safe, and sanitary housing.<\/p><p><strong>Key Features<\/strong><\/p><ul><li><strong>Minimum down payment<\/strong>: None<sup>20<\/sup><\/li><li><strong>Minimum credit score<\/strong>: 640<sup>21<\/sup><\/li><li><strong>Debt-to-income ratio<\/strong>: 41%<sup>22<\/sup><\/li><li><strong>Mortgage insurance<\/strong>: Upfront fee up to 3.5% of the loan amount and an annual fee up to 0.5% of the average annual scheduled unpaid principal balance<sup>23<\/sup><\/li><li><strong>Loan limits<\/strong>: $336,500 to $776,600, depending on your location<sup>24<\/sup><\/li><li><strong>Other requirements<\/strong>: Must be in an eligible rural area, income can\u2019t exceed 115% of the median household income<sup>20<\/sup><\/li><\/ul><p><strong>Pros and Cons<\/strong><\/p><p><strong>Pros<\/strong><\/p><ul><li>No down payment required<\/li><li>Funds can be used for many purposes<\/li><\/ul><p><strong>Cons<\/strong><\/p><ul><li>Low loan limits<\/li><li>Higher credit-score requirement<\/li><li>Strict eligibility requirements<\/li><\/ul><p><strong>Pros Explained<\/strong><\/p><ul><li><strong>No down payment required<\/strong>: USDA loans offer 100% financing, meaning no down payment is required.<\/li><li><strong>Funds can be used for many purposes<\/strong>: USDA funds can be used for home purchases, as well as builds, repairs, rehabilitation, refinancing, and more.<\/li><\/ul><p><strong>Cons Explained<\/strong><\/p><ul><li><strong>Low loan limits<\/strong>: The minimum loan limits for USDA loans are considerably lower than those for any other type of mortgage, and start at just $336,500 for many areas.<\/li><li><strong>Higher credit-score requirement<\/strong>: While the USDA doesn\u2019t require a minimum credit score, lenders generally require a score of at least 640, which is higher than what\u2019s required for other types of loans.<\/li><li><strong>Strict eligibility requirements<\/strong>: USDA loans have strict eligibility requirements in terms of locations where they can be used, the maximum borrower income, and more.<\/li><\/ul><p><strong>When a USDA Mortgage Works Best<\/strong><\/p><p>USDA loans are best-suited to low- and moderate-income borrowers in rural areas who want to buy a home but may be struggling to save up a down payment.<\/p><p><strong>Jumbo Conventional Mortgage<\/strong><\/p><p>A jumbo conventional mortgage, also known as a non-conforming loan, is one that isn\u2019t backed by a government agency and doesn\u2019t meet the loan limits set by the FHFA.<sup>4<\/sup><\/p><p>Because jumbo loans don\u2019t meet conforming loan requirements, they are higher risks for lenders. They also leave more discretion to lenders when setting requirements for minimum down payments, credit scores,\u00a0<a href=\"https:\/\/www.thebalancemoney.com\/what-debt-to-income-ratio-do-you-need-for-a-mortgage-4771883\">DTI ratios<\/a>, and other factors.<\/p><p><strong>Key Features<\/strong><\/p><ul><li><strong>Minimum down payment<\/strong>: 20%<sup>25<\/sup><\/li><li><strong>Minimum credit score<\/strong>: 700<\/li><li><strong>DTI ratio<\/strong>: Varies<\/li><li><strong>Mortgage insurance<\/strong>: None<\/li><li><strong>Loan limits<\/strong>: $1 million to $2 million<sup>4<\/sup><\/li><li><strong>Other requirements<\/strong>: 6-12 months\u2019 mortgage payments in cash reserves<sup>26<\/sup><\/li><\/ul><p><strong>Pros and Cons<\/strong><\/p><p><strong>Pros<\/strong><\/p><ul><li>Higher loan limits<\/li><li>More loan flexibility<\/li><\/ul><p><strong>Cons<\/strong><\/p><ul><li>Higher interest rates<\/li><li>Stricter eligibility requirements<\/li><\/ul><p><strong>Pros Explained<\/strong><\/p><ul><li><strong>Higher loan limits<\/strong>: A jumbo loan is an opportunity for those who want to borrow more than the conforming loan limits to qualify for a mortgage.<\/li><li><strong>More loan flexibility<\/strong>:<strong>\u00a0<\/strong>Jumbo loans don\u2019t have to meet the loan requirements set by Fannie Mae and Freddie Mac, meaning lenders have more flexibility to set their own requirements.<\/li><\/ul><p><strong>Cons Explained<\/strong><\/p><ul><li><strong>Higher interest rates<\/strong>: Due to the higher risk to the lender, jumbo loans often have higher interest rates than conforming loans, although that\u2019s not always the case<sup>25<\/sup><\/li><li><strong>Stricter eligibility requirements<\/strong>: Jumbo loans have stricter eligibility requirements when it comes to your credit score, down payment, cash reserves, and more.<\/li><\/ul><p><strong>When a Jumbo Conventional Mortgage Works Best<\/strong><\/p><p>A jumbo loan might be the best option if you want to buy a home that exceeds the conforming loan limits set by the FHFA. Keep in mind that due to the stricter requirements of jumbo loans, they usually are most realistic for borrowers with a solid financial foundation.<\/p><p><strong>The Bottom Line<\/strong><\/p><p>Wading through the numerous options for mortgages can be overwhelming. But if you first determine which types are best for you based on your own financial situation, the kind of house you want to buy, the interest rate for which you\u2019re eligible, loan term, and applicable fees,\u00a0<a href=\"https:\/\/www.thebalancemoney.com\/how-to-apply-for-a-mortgage-5218363\">picking one<\/a>\u00a0that works well for your home purchase should become simpler.<\/p><p><strong>Frequently Asked Questions (FAQs)<\/strong><\/p><p><strong>What are the different types of reverse mortgages?<\/strong><\/p><p>A\u00a0<a href=\"https:\/\/www.thebalancemoney.com\/reverse-mortgage-pros-and-cons-2388750\">reverse mortgage<\/a>\u00a0is one that allows homeowners to take equity out of their homes in the form of cash to help with living expenses during their later years. There are three types of reverse mortgages: single-purpose reverse mortgages, proprietary reverse mortgages, and home equity conversion mortgages (HECMs).<sup>27<\/sup><\/p><p><strong>Which types of mortgages are most risky for the lender?<\/strong><\/p><p>Jumbo loans are the riskiest for lenders because they aren\u2019t backed by a government agency, nor can they be purchased by\u00a0<a href=\"https:\/\/www.thebalancemoney.com\/what-is-fannie-mae-fnma-3305986\">Fannie Mae<\/a>\u00a0or Freddie Mac.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"<p>What Type of Mortgage Should I Get? Learn the best type of mortgage for you By Erin Gobler Imagine that you\u2019ve decided to buy a home and are ready to get preapproved for a mortgage. But once you start researching, you find there are many different types of home loans to choose from, each with&#8230;<\/p>\n","protected":false},"author":1,"featured_media":0,"parent":0,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"","meta":{"footnotes":"","_links_to":"","_links_to_target":""},"class_list":["post-14668","page","type-page","status-publish","hentry"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>What Type of Mortgage Should I Get? - Integrity Capital<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/testv78.demowebsitelinks.com\/Integrity-Capital\/what-type-of-mortgage-should-i-get\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"What Type of Mortgage Should I Get? - Integrity Capital\" \/>\n<meta property=\"og:description\" content=\"What Type of Mortgage Should I Get? 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