Types of Home Loans
Available for Your Clients
Once you’ve helped your buyer find the home of their dreams, they’ll need a mortgage to match. They may want to rush to closing day — understandably so, they’re fulfilling a dream — but they’re counting on you to help guide them to the right mortgage partner to complete the process.
A banker could point you in the right direction, but they’ll likely only offer one option that may not be suited to their individual needs. Partnering with an independent mortgage broker opens your client up to loan approvals from multiple lenders. With several options to choose from, they’re free to select the loan that’s best for their finances and future.
What types of loans are there? Knowing the types of home loans for first-time buyers and experienced homeowners alike will help you field your client’s mortgage questions and guide them to a smooth closing.
30-YEAR FIXED Loan
Interest and mortgage payments remain the same for 30 years. This type of home loan is a popular choice for buyers who want consistency throughout the life of the loan. The stability of a predictable budget is a great advantage for your first-time homeowner clients.
ARM Adjustable Rate Mortgage
With this mortgage, the interest rate borrowers pay adjusts at a specified time and frequency. When an ARM adjusts, they may pay more or less, depending on market trends. Typically, ARM loans start with a fixed interest rate for three to 10 years, with the interest rate changing in each year that follows. Initial interest rates are typically low, so an ARM loan could be appealing to clients who plan to move before they adjust.
FHA Loan Federal Housing Administration
This type of home loan allows borrowers to make a down payment as low as 3.5% of the home’s purchase price. It’s backed by the Federal Housing Administration and usually allows for lower credit scores than a conventional loan — making it a great option for first-time buyers who are building or repairing their credit.
15-YEAR FIXED Loan
With this type of home loan, interest and mortgage payments remain the same for 15 years. These loans can have a lower fixed rate, but a higher monthly payment than a 30-year fixed because they’re paying off the loan in half the time. If your buyer is looking to save money in the long-term, a 15-year fixed loan will help them do it.
If the amount your client needs to borrow exceeds the conforming loan limit set by the Federal Housing Finance Agency (FHFA), your best option could be a jumbo loan. Mortgage lenders take on additional risk with jumbo loans compared to loan other types, and approval qualifications are higher as a result. Jumbo loan limits can vary based on your buyer’s intended location, but your local mortgage broker will have the latest thresholds.
VA Loan U.S. Department of Veteran Affairs
VA loans offer lower interest rates and special mortgage terms for veterans, active duty service members, and qualifying family members. VA home loans are backed by the U.S Department of Veterans Affairs and don’t require a down payment at all — making them a great option for any buyer who qualifies.
Give your buyers multiple home loan types to choose from by partnering with an independent mortgage broker. Search for one in your area today!