Virginia Real Estate: Types of Mortgages

Have you decided to buy your first home? Are you an investor looking to flip a property? Either way, mortgages are an important aspect of any house purchase. Mortgages come in all shapes and sizes. Mortgages can have different terms, rates, and obligations based upon the type of mortgage you qualify for. Below are some basic types of mortgages. Each of the types of mortgages listed below have several different subtypes of mortgages that are best discussed with your lender.

Conventional Mortgage

This is one of the most common types of mortgages. This mortgage is a private transaction between yourself and a lending institution. There are several different types of lending institutions. One common example of a conventional mortgage is a loan from your local bank.

These types of mortgages can come with a variety of benefits. Because these loans are with private institutions, your lender has a lot more freedom to offer incentives or other benefits. These mortgages are typically accessible for individuals with a good job and good credit.

FHA Loan

These types of loans are backed by the federal government. FHA stands for Federal Housing Administration. This is the governmental body responsible for supporting these types of loans.

The benefit of a FHA loan is that you may qualify for these loans even if your finances or credit are not that good. The downside of an FHA loan is that you are limited in the number of times you can qualify for this type of loan and the rates are highly regulated. The federal government sets strict standards for the amount of downpayment that has to be made and the rates associated with the mortgage.

VA Loan

These loans are only available for certain qualifying individuals. VA stands for Veterans Affairs. These are excellent loans for service members. More highly regulated than FHA loans, these loans are even more accessible than FHA loans and conventional loans.

How to Choose a Mortgage

There are a lot of considerations in deciding which types of mortgage or lending institution is right for you. Some of those considerations are legal in nature. Mortgages can have provisions related to when the lending institution can foreclose, potential increases in payments during the lifespan of the loan, and several other terms that are important to know. If you are considering buying your first home or investing in real estate, consider working with a team to determine what financial arrangements are best for you. Consider a team of a real estate agent, a CPA, and an attorney to maximize your understanding of your potential purchase.