But not to fear - we’ve outlined the most common types of loans you’re likely to encounter as well as which ones are the best fit for your situation. 

Conventional Loan

One of the most common types of mortgages is a conventional loan. For buyers with a good credit score, minimal debt, and stable employment, these loans are usually a great option. 

You can finance almost any property type for as little as 3% down if you’re a first-time homebuyer or 5% down if you’re a returning home buyer. 

However, if you put less than 20% down, you’ll have to pay for private mortgage insurance.

Government-Backed Loan

Believe it or not, you can also receive loans backed by government agencies. While different government-backed loans have different requirements, you may be able to save money on interest or a down payment. 

FHA Loan

FHA loans are issued by the Federal Housing Administration. If you have a lower credit score or prefer smaller down payments, this loan can be a good choice for first-time homebuyers due to their flexible eligibility requirements. 

VA Loans

VA loans are issued by the Department of Veterans Affairs. While you do have to meet specific service requirements as an active duty member or veteran of the U.S. Military, you may be able to buy a home with lower interest rates and $0 down.

USDA Loans

USDA loans are issued by the United States Department of Agriculture, and they were created to help improve development in rural areas. 

These loans can have several perks if you buy a home in the right area, including lower mortgage insurance requirements and the ability to buy a home with no money down.

If you meet the income requirements, you simply have to buy a home in a USDA-eligible area to qualify.

Fixed-Rate Mortgage Loan

If you want a predictable monthly payment, a fixed-rate mortgage is the loan for you. With these types of loans, you will pay the same interest rate for the lifetime of the loan.

These loans are a good choice for people who are in their “forever home” and want a steady house payment. While your insurance premiums and property taxes may change, you can budget for your home payments with relative ease. 

Adjustable-Rate Mortgage Loan

With an adjustable-rate loan, your mortgage payment will change based on the market rate. While you may get a lower introductory interest rate, your mortgage payment may go up or down depending on certain economic conditions. 

This type of loan is accompanied by a certain level of risk. If rates stay consistently low, you may pay less. But there’s a better chance you will pay a higher monthly rate over time.

Jumbo Loan

Finally, a jumbo loan is typically used to finance high-end homes. While jumbo loans are considered a conventional type of loan, they have non-conforming limits, meaning the price of the home exceeds the federal loan limits. 

For these types of loans, you’ll need a high credit score, a lower DTI ratio, and likely a larger down payment.

So, Which One Should I Choose?

As you may have noticed, different loans are better suited for different financial goals and situations. And depending on your financial state, more than one would be a good fit (or not).

Some important factors to consider include:

• How much you’ll use for a down payment
  
• Your credit score
  
• Your debt-to-income ratio
  
• The level of risk you want to tolerate
  
• Your plans for the future
  

By considering these questions, you can whittle down your options to find the best fit for your mortgage loan. Once you find the loan you want, the only thing that’s left is to find the perfect home.

Hunt Custom Homes has you covered there. We have a stunning variety of new homes in Tyler, TX, from which to select.