Choosing the right mortgage may feel like a daunting task, especially if this is your first time purchasing a home. It probably feels like there are lots of moving pieces with too much confusing terminology. You may feel pressure to be sure what you choose is the best decision for you and your family.
We get it. Our team at City Creek Mortgage wants to be sure you understand the process and feel good about all your options. From beginning to end, we walk you through all your options to ensure your choice is one you can feel great about.
There are six main types of mortgages. We will work together to determine which is best for you.
The Basic Six
Not all mortgages are the same. Luckily, at City Creek, we work hard to find the mortgage that makes the most (and best) financial sense for you. We are transparent in our process so you’ll never be caught by surprise, and we explain as we go so you feel confident about your choices.
- Conventional. The government does not insure conventional loans. Typically, these loans are made to borrowers with stable income and work histories, good credit, and can make at least a 3% down payment.
- Conforming. These loans vary by geographic area and are bound by maximum loan limits set by the federal government. For example, in 2021, the Federal Housing Finance Agency set the base conforming loan limit at $548,250 for a one-unit property.
In certain geographic regions, like New York City, maximum loan limits are higher because home prices are higher in these areas than in other parts of the country.
- Non-conforming. These loans cannot be sold/bought by Fannie Mae and Freddie Mac because of the loan amount and underwriting guidelines. Jumbo loans are the most common type of non-conforming loan. These are known as jumbo loans because they exceed conforming loan limits.
For this type of loan, buyers usually need to show large cash reserves, make a down payment of 10%-20% or more, and have strong credit.
- Federal Housing Administration. FHA loans have more relaxed credit score requirements than conventional loans. Typically sought after by low- to moderate-income buyers likely seeking to purchase a home for the first time, these loans allow only an approximately 3.5% down payment.
One downside to an FHA loan is that borrowers pay an upfront and yearly mortgage insurance premium that protects the lender from default for the loan’s lifetime.
- VA Loans. For qualified military service members, veterans, and their spouses, the VA guarantees homebuyer loans. With a VA loan, homebuyers can finance 100% of the loan amount with no required down payment. Typically, closing costs are lower, there are better interest rates, and there’s no need for loan insurance.
There is a funding fee associated with VA loans. These fees, which may be waived depending on specific information about the service member applying, help offset the cost of this loan to the taxpayer.
- USDA Loans. For low-income buyers in rural areas, the US Department of Agriculture guarantees loans to make homeownership a reality. These loans require little money down for qualified buyers, as long as properties meet USDA eligibility rules.
Two More Terms to Know
- Fixed-Rate Mortgages. These types of mortgages are exactly what they sound like. Typically offering a 15- or 30-year repayment plan with an interest rate that never changes for the lifetime of the loan, fixed-rate mortgages promise that the borrower can rely on a relatively unchanged monthly payment, which offers great peace of mind to most.
- Adjustable-Rate Mortgages. With a fixed interest rate for up to the first 10 years, the rate fluctuates with market conditions after this period expires. This can be good news, depending on where the market is at the end of the ten years; however, it can also be risky if interest rates are higher than when you obtained your mortgage, and now you’re forced into higher monthly payments.
The good news is, our team is here to walk you through all these pieces. We will help find the best mortgage for you with the terms that fit your situation best. You are not alone in this process. We’re here to help!
The City Creek Difference
City Creek Mortgage isn’t your typical mortgage company. Our small, family-owned, local business is a family to our employees and a safe place for our clients to make big decisions.
From the very beginning in 1998, owners Mike and Tobi Roberts set out to provide a mortgage company that did right by their clients, took personal responsibility for their company, and provided quality service and an excellent product.
For Mike and Tobi, it’s always been personal. Not only do they care about their clients, they care about their employees. When you work with us, you will notice a difference from the very beginning of your mortgage process. We want to be the most trusted, respected, and loved mortgage company in Utah.