The different types of mortgages

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The different types of mortgages


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Our common idea of a mortgage is actually not called a mortgage; it is called a trust indenture.  A mortgage is only for 20 acres or more. But that’s just technical terms, so for the sake of the article we will stick with “mortgage” when referring to the legal agreement between your bank (or other creditor) lending money at interest to you.  So they lend you money- what do they get in return?  1. They take your title of your property until you can pay off the whole debt and in the meantime they get interest for doing this for you.  Now on to the types of mortgages

CONVENTIONAL

The two most commonly known conventional loans are Fannie May and Freddie Mac.  These are government CONTROLLED, but not government BACKED.  You can buy a house with one of these loans with as low as 3% down.

DO FICO SCORES REALLY MATTER?

Yes.  If you have a good FICO score you can get mortgage insurance with the same interest rate as someone who put 20% down even if you only put 5% down.  So what’s the “key” number? 740 (out of 850). A 740 credit score (FICO) will give you all the same benefits as a 800 FICO score.  If your FICO score is under 680, it may be time to look at a FHA loan.

FHA LOAN

FHA loans are usually easier to get.  Single family homes, mobile homes, and townhomes (you own the dirt) are all FHA approved.  Few condos are FHA approved so you will probably end up going with a conventional loan for that.  FHA loans require 3% down and Mortgage Insurance for the life of the loan.

VA LOAN

If you are not a veteran/ part of the military or National Guard or a spouse of a deceased, you can skip this section.  If you are a part of that, you are most likely eligible to apply for a VA loan.  These loans are great.  They require 0% down and there is no income limit or mortgage insurance required. 

RURAL DEVELOPMENT LOAN

This loan is pretty hard to get, but if you qualify it is a great loan.  It also has 0% down.  There is an income restriction on this one (a family of 4 can’t make more than $82,800) and it has to be in what is considered “rural” (so Belgrade, Manhattan, Three Forks etc. but not Bozeman)

I WANT MORE

Check out the chart below to get more information on each of the loans!  If you’re interested in learning more, HRDC holds an awesome homebuyer’s class packed with information.  The course is free and open to everyone, but space fills up quickly.  (must register and a $25 refundable deposit check is required to hold your seat). To register email hbe@thehrdc.org.  Here are some upcoming dates:

DATES/ TIMES                            LOCATION

June 19 & 20, 5-9 pm                32 S Tracy HRDC Conference Room

July 11 & 12, 5-9 pm                 Opportunity Bank 123 S Main ST LIVINGSTON

July 31 & Aug 1, 5-9 pm            32 S Tracy HRDC Conference Room

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