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Step 1
If you have a good credit history you can choose a conventional mortgage, through one of your local banks or financial institutions. Conventional mortgages usually have lower interest rates but are typically more difficult to get. Most lenders of conventional home loans require that you have at least 20% cash as a down payment up front. That means you will only be financing 80% of the purchase price on the home.
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Step 2
If you have a few minor credit issues, check into an FHA home loan. An FHA loan is easier obtain because the Federal Housing Administration is insuring your mortgage loan. This allows lenders to loosen up their belts on qualifications. Usually with an FHA home loan you are only required to have 3% cash for a down payment. FHA mortgage loans usually also have competitive interest rates.
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Step 3
Last, and the least favorite of all, is the sub prime mortgage. These types of mortgages are for those borrowers who usually have a FICO score of below 600, and a poor credit history. People who do not qualify for a conventional or FHA home loan may be able to qualify for a sub prime mortgage. Because the borrowers present a higher risk factor, the interest rate on the sub prime mortgage loan will be higher than the prime lending rates. Usually the sub prime mortgage loan will have a fixed rate at first with an adjustable rate kicking in after a fixed period of time. Meaning that your mortgage loan payment will fluctuate once the ARM kicks in. If you have had enough time to clean up your credit report, you may be able to refinance your home with a fixed rate to keep your payment at a more affordable level before the ARM takes effect.
Comments
timbucktoo said
on 4/25/2009 Nice survey of mortgage types. You can also vary terms and interest payment structures too.