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Quontic’s Mortgage Guide: The Basics

When it comes to financing a home or investment property, there are plenty of different lending options available to you. Understanding what exactly each type of mortgage option entails allows you to quickly and efficiently seek out your preferred loan that best fits your lending needs. Here is Quontic’s quick guide to a few common types of home loans.

Fixed-rate

A fixed-rate home loan is best known for its consistency and variety of term lengths that most commonly extend to 10, 15, 20, and 30-years. Like its name suggests, a fixed-rate mortgage is paid off with a fixed-rate each month. In other words, your monthly payments will not change during your loan’s lifespan.

ARM: Adjustable-rate Mortgage

An adjustable-rate mortgage is a type of home loan whose interest is fixed—or invariable—for some time, and then changes, or becomes variable. If you acquire a 5/1 ARM, it means that for the first five years, the loan’s interest rate will remain the same before possible changing for the sixth year and beyond. If you choose to take out a 7/1 ARM, the interest rate will stay the same for seven years before possibly changing every year after that.

Interest-only

An interest-only loan allows you to only pay for the interest portion of your monthly payment for a set period of time. Once that time period is up, you are then responsible for paying the entirety of your monthly payment. While this option will extend the amount of time you spend in repayment, it’s an excellent option for individuals who are in a tight spot financially and cannot afford to pay the total amount of their monthly payment.

Conventional

Conventional loans are home loans that are not insured by the federal government. They can either be conforming or non-conforming. A conforming loan meets the limits set by Fannie Mae or Freddie Mac guidelines, while a non-conforming loan meets the guidelines determined by a private lender.

FHA & VA

FHA loans are loans that are backed by the Federal Housing Association. They typically provide homeownership to lenders who lack a solid credit score (ranging from 500-580) and can only afford a low downpayment ranging from 3.5-10%.

By design, VA loans help active duty service members or veterans purchase a home. VA loans are unique in that they do not require a downpayment and may allow up to 100% LTV.

Jumbo

Borrowers require a jumbo loan—or a non-conforming conventional loan—when they need to finance a property that goes beyond the traditional conforming loan limit, which typically caps at $510,400. Due to its size, jumbo loans are not backed or insured by Freddie Mac or Fannie Mae, which means the lender is not protected from suffering a loss if the borrower defaults. Jumbo loans typically require a higher credit score that exceeds 700 for a borrower to qualify.

Reverse Mortgage

A reverse mortgage is available to a homeowner over the age of 62 with built-up home equity. Taking out a reverse mortgage is an appealing option for those who are running on a tight budget or need to make home repairs since a reverse mortgage acts as a source of income. 

When someone takes out a reverse mortgage, they are borrowing against their home in exchange for a fixed monthly line of credit. The “borrower” will not have to make any loan payments while they occupy their home; instead, the total loan balance is due if the borrower dies, moves away, or decides to sell their home.

No matter what unique situation pertains to you, there are plenty of lending options available to get you into your home sweet home in no time.

Looking for a lending option that works for you?

Quontic has your solutions.

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