Subprime – bad interest rates (for those with bad credit)
Conventional
- Backed by a bank
- Higher down payment
- Higher credit score
Unconventional
- Lower down payment
- Backed by the gov
- More risk
- Lower credit score
FHA
- Can be as low as 3.5% down (for first time home buyers, need to live in prop for at least one year)
- 30 year fixed (remember the less put down, the more you pay because of interest)
- MIP (mortgage insurance premium) MUST be paid for the entirety of the loan
- Usually have higher interest rates (more of a risk for the lender)Some offers might not be taken as seriously (especially for investors)
VA – for qualified veterans
- 0% down payment
USDA
- 0% down payment
- Prepayment penalties
ARM Loans – Adjustable Rate Mortgage
- Not recommended but can be useful in some situations (a quick flip)
- Better for short term
- May be only option for commercial properties
Non-Conforming Vs. Conforming
Non-Conforming: Doesn’t follow Fannie Mae or Freddie Mac guidelines EX: jumbo loan (loans above a certain amount)
Conforming:
- More common
- Better rates
- Lower down payment
- Private Mortgage Insurance (PMI) – once you pay off at least 20% of the home, you no longer have to pay PMI (keep in mind the insurance is for the LENDER, so if can avoid this, do so)