When you buy a home, learning about the array of available mortgage types can pay off.
Your real estate agent or lender might tell you about common 20 percent down conventional loans or low-downpayment FHA loans.
But as a proactive home buyer, you can research niche loan types that may help you achieve homeownership faster and at better terms.
With that knowledge in hand, youâ€™ll come at home buying from a different angle. You will be better equipped and educated to choose the right loan for your situation.
Your friends and family mayÂ not have heard of the loan program youÂ end up using, and that's okay. Some of the best loan typesÂ are also the least known.
What really matters is your satisfaction with your home and loan.Click to see today's rates (Dec 8th, 2016)
All mortgage loans were not created equal. And thatâ€™s a good thing for the consumer.
From fixed to adjustable rate, conventional to VA, each loan product possesses its own set of strengths that serve a subset of buyers.
Lenders are eager to fill the needs of more families, some of which do not fit into what were once considered traditional lending guidelines.
So new products are coming on the market, making more families eligible. Learning about the new loan types available means a little extra time and effort, but also greater reward.
Lenders are continually innovating and coming up with new types of loans that appeal to a broad range of home buyers. Here are four that youâ€™ll want to explore if youâ€™re currently in the market for a new home.
Homeownership is becoming more accessible thanks to nationwide programs being created by the biggest rule-making agencies.
These programs are turning renters into buyers without the need for substantial liquid funds.
HomeReadyTM is a mortgage program administered by Fannie Mae and offered by banks and mortgage companies across the country. It requires just 3% down, and buyers can use non-traditional income types to qualify.
Income from boarders or roommates will be considered, as will that of non-borrowing parents and other householdÂ members.
A similar program is Freddie Mac's Home Possible AdvantageÂ®. It also allows a 3% downpayment and offers reduced mortgage insurance to make homeownership more affordable.
Both these programs would require just $6,000 in upfront cash to purchase a $200,000 home.
That is a reduction of $1,000 in upfront costs compared to FHAâ€™s already-low downpayment minimum of 3.5%.Click to see today's rates (Dec 8th, 2016)
The piggyback mortgage is a consumer-friendly option that lets borrowers avoid private mortgage insurance (PMI) while putting down less than 20 percent.
This program is aimed at higher-credit borrowers who have at least 10% down. Yet some lenders areÂ more flexibleÂ on down payments and credit scores.
Piggyback mortgages layer one loan on top of another to cover a larger percentage of the propertyâ€™s purchase price. They come in a variety of iterationsâ€”including 80/10/10, 80/5/15, and 80/15/5.
An 80/10/10 piggyback loan, for example, is structured as follows.
In some cases, overall costs will be lower than with a single 90% loan-to-value mortgage. Piggyback mortgages do not require PMI and second mortgage rates are low.
Special lending options support the nationâ€™s government workers, teachers, emergency personnel, firemen, and police. These loans are continually being honed to meet the needs of the countryâ€™s service workers.
Designed by the U.S. Department of Housing and Urban Development (HUD), the Good Neighbor Next Door program provides these discounts in an effort to bring â€śgood neighborsâ€ť into select revitalization areas.
Buyers who are employed in one of the lenderâ€™s eligible professions receive a 50% discount on select homes and need just $100 down. Teachers, police officers, firefighters, and EMTs may purchase a home in select areas at steep discounts and flexible terms.
Historically, condominium buyers have faced unique financing challenges when using FHA financing. Condominium complexes must be on FHAâ€™s approved list. Otherwise, the buyer must use another loan typeÂ to buy any unit within the complex.
But in 2015, Congress passed the Housing Opportunity through Modernization Act, eliminating some small but important requirements that were keeping many condo complexes off the list. It may take some time, but more condos should soon become available to FHA buyers in the coming year.
This is good news for low- to moderate-income and first-time buyers who want a more affordable option than buying a free-standing home.
FHA loans allow borrowers to finance up to 96.5 percent of their condominium purchase price. Owning an FHA-approved condo could be as affordable as renting an apartment.
Mortgage interest rates are low and the number of niche loan options is growing.
Most U.S. real estate markets still offer properties and prices that are in-reach for the average-income buyer, thanks in part to extremely low mortgage rates.
Whether you want to use a low downpayment loan, a piggyback option, or a condo loan, now is a great time to check current mortgage rates and come up with a purchase plan that works for you.Click to see today's rates (Dec 8th, 2016)
The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.
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2016 Conforming, FHA, & VA Loan Limits
Mortgage loan limits for every U.S. county, as published by Fannie Mae & Freddie Mac, the Federal Housing Administration (FHA), and the Department of Veterans Affairs (VA)