Home Loan Programs: Explained
Mortgages are complicated. That’s a universal fact. From the type of loan to the type of property, interest rates to credit scores, and everything in between, buying a home is far from straightforward. That’s why we’ve compiled this guide. It’ll run you through some of the things you need to know and make the murky mortgage world a little clearer.
What even is a Mortgage?
A mortgage – also called a home loan – is simply a loan secured against a property. House, apartment, condo, fixer-upper… whatever the property may be. Some property types, like apartments and condos, have special requirements that differ from lender to lender – while some others, like fixer-uppers, sometimes necessitate “rehab” loans (where the mortgage loan includes extra cash to fund repairs).
What about Home Loan Programs?
Home loan programs are essentially types of mortgages. Just as clothing isn’t one-size-fits-all – or even one-style-fits-all – neither are mortgages. Different home loan programs suit different borrowers, and they all have their own pros and cons. We’ll give you a brief run-down.
Conventional home loans are standard loans that typically fit the average buyer – they’re the most common. Jumbo loans are similar to conventional loans, but the size of the loan is greater. FHA loans are government-insured, and designed for lower-income borrowers. VA loans are a special category for eligible military members and veterans. Finally, Non-QM loans are for borrowers who don’t fit standard mortgage guidelines but can qualify in an alternative way.
How do Interest Rates and Credit Scores Work?
As a borrower, interest rates are one of the most important things to consider when searching for a home loan. They will directly influence how much your mortgage costs. You’ll want to lock down the lowest interest rate that you can possibly find, which will be determined by some combination of the lender that you use and your own unique circumstances: your down payment, your income, your existing debt, and – yes – your credit score.
Your credit score is critical in taking out a mortgage. It indicates to the lender how much risk they might be taking on by lending to you. In other words, it tells them how good of a borrower you are. The better your credit score, the better of a borrower you are considered to be – and the better interest rate you might be able to get. That being said, the other parts of your application – like how much money you make, and how big your down payment is – can mitigate bad credit to some extent.
Why it’s Important to Have Somebody on Your Side
This has been just a brief overview of some of the broader home loan options – and it’s already getting complicated. It is quite literally somebody’s job to work with all of these variables and create the best outcome for both borrower and lender. When you go to the pharmacy, you don’t expect to possess the expertise of a pharmacist – so it follows that when you want to get a mortgage, you shouldn’t expect yourself to have the knowledge and expertise of a professional.
That’s where UW Funding comes in. We’re a mortgage broker, which means that we don’t work for any one funding source. Rather, we work for you. We shop around for the best interest rates on your behalf, we’re always on your side, and we work with you through all of the options – from start to finish. You can trust our expert guidance in tailoring a home loan to fit you. Reach out today for a no-obligation chat to see how we can help you.