Here’s a table comparing different types of residential mortgage loans:
| Loan Type | Interest Rate | Loan Term | Down Payment | Credit Score Required | Mortgage Insurance |
|---|---|---|---|---|---|
| Conventional | Fixed or adjustable | 10-30 years | 3-20% | 620+ | PMI required with less than 20% down |
| FHA | Fixed or adjustable | 15-30 years | 3.5% | 500-579 (10% down) or 580+ (3.5% down) | MIP required for the life of the loan |
| VA | Fixed or adjustable | 15-30 years | 0% | None required | Funding fee required, but can be rolled into loan |
| USDA | Fixed | 30 years | 0% | 640+ | Annual and upfront guarantee fees required |
- The government does not insure conventional loans, and typically require a higher credit score and down payment. Private Mortgage Insurance (PMI) is required if the down payment is less than 20% of the home’s value.
- The Federal Housing Administration insures FHA loans and require a lower credit score and down payment. Mortgage Insurance Premium (MIP) is required for the life of the loan.
- VA loans are available to eligible veterans and their families and offer a zero down payment option. No mortgage insurance is required, but a funding fee is required and can be rolled into the loan.
- USDA loans are available to low- and moderate-income borrowers in rural areas. No down payment is required, but annual and upfront guarantee fees are required.
- A jumbo home loan, also known as a jumbo mortgage, exceeds the conforming loan limits set by the Federal Housing Finance Agency (FHFA). Conforming loan limits are the maximum loan amounts that Fannie Mae and Freddie Mac, the government-sponsored entities that buy and sell mortgage loans, are allowed to purchase.
- As of 2021, the conforming loan limit for a single-family home in most parts of the United States is $548,250. Jumbo loans are typically used to finance high-value properties that exceed this limit, such as luxury homes or properties in expensive real estate markets.
- Because jumbo loans are considered higher risk for lenders, they often have stricter eligibility requirements and higher interest rates compared to conforming loans. Borrowers may need a higher credit score, a larger down payment, and a lower debt-to-income ratio to qualify for a jumbo loan. Lenders may also require more documentation and a more thorough underwriting process for jumbo loans.
It’s important to note that the interest rate and other terms of the loan can vary depending on the lender and other factors, such as the borrower’s credit history and financial situation. It’s always a good idea to shop around and compare different loan options before making a decision.
DISCLAIMER: THE INFORMATION PRESENTED IN THIS ARTICLE IS FOR EDUCATIONAL PURPOSES ONLY, AND YOU SHOULD NOT CONSIDER IT AS LEGAL, FINANCIAL, OR ANY OTHER TYPE OF ADVICE.
Contact Vikas Sarawat – Real Estate Agent in Colorado at 303-800-8206
