So, you’re ready to make a move and buy a house. It’s an exciting time! However, it can also be stressful and confusing when you start diving into the financing aspect of it all. Figuring out which type of loan is right for you is no easy feat. Luckily, when you buy with Taylor Morrison, we have home funding experts ready to help you create a plan that works with your qualifications and down payment availability.
Are you struggling to know where to start when it comes to loan programs? If so, read on! Here’s a high-level overview of the types of loan programs available, what you should know about each, and quick checklists to determine which type of loan could work for you.
Two Mortgage Loan Types: Government vs. Conventional
The first thing you should know is that there are two overarching groups when it comes to mortgage loans: government and non-government (also known as conventional loans).
The three US government departments back government loans. It is important to take note of the Federal Housing Department (FHA), an agency within the Department of Housing and Urban Development (HUD). The FHA provides mortgage insurance for residential mortgages and sets underwriting standards.
Things to Note: FHA Loans
FHA loans are not exclusive to first-time homebuyers; however, they are typically preferred for people with lower down payment options. In addition, people who apply for FHA loans are often given qualification flexibility for their credit scores and debt-to-income ratio.
Is an FHA Loan for You?
If you receive an FHA loan, you will pay upfront and monthly mortgage insurance. Plus, you will have loan limits depending on the country where you purchase.
Another type of government loan is the VA Home Loan Guaranty Program, which encourages lenders to offer low down payment financing to eligible active-duty veterans or their surviving spouses. These loans are made possible by the Department of Veterans Administration (VA), which partially guarantees the lender against a loss.
Things to Note: VA Loans
VA loans require a funding fee which wraps into the loan amount. These funding fees vary depending on whether the veteran is using their benefit for the first time, a subsequent time, or is exempt due to VA disability.
Is a VA Loan for You?
If you qualify for a VA loan, you will not be required to supply any down payment, unless you have an existing VA loan at the time of your new home closing, or the purchase price is above the conforming loan limits. If your purchase price is above these limits, you may have to put some money down.
Looking for more home financing information? Check out our blog on closing costs here!
Conventional or Conforming Loans
Conventional loans are backed by non-government entities, including private mortgage lenders like banks, credit unions, and other financial institutions. They are sometimes referred to as conforming loans, which means the loan amount is within Fannie Mae and Freddie Mac’s eligible loan limits.
Important note: Fannie Mae and Freddie Mac are home mortgage companies created by Congress.
Is a Conventional Loan for You?
To receive a conventional loan, the minimum down payment you may qualify for is 3%. However, mortgage insurance will be required if you do not place 20% down.
Jumbo or Non-Conforming Loans
Jumbo, also known as non-conforming loans, are still conventional loans. These loans (hence the name) are given when the loan amount is above the conforming loan limit and outside of Fannie Mae or Freddie Mac underwriting guidelines.
Is a Jumbo Loan for You?
If you are looking to buy a higher-priced property, a jumbo loan could be the right option for you. Accordingly, your interest rate may be higher than the conforming rates, depending on your qualification and loan amount.
The Taylor Morrison Home Funding Difference
Thanks for reading our overview of loan programs! Rest assured, it’s okay if you don’t know everything about the range of available financing options for your new home! At Taylor Morrison Home Funding, we are more than mortgage bankers; we are professional loan consultants ready to dedicate our time, knowledge, and experience to helping you tailor a mortgage program to fit your life.
Stop searching and start living! Take advantage of limited-time savings with our finance offers today.
From all of us at Taylor Morrison, welcome home!
Blog is intended for general informational purposes only and not as an exhaustive comparison of all factors applicable to your personal financial situation. Data used was derived from third-party sources and deemed reliable as of the date obtained, but not guaranteed, offered as investment or tax advice, or independently verified by Taylor Morrison; all information remains subject to change outside of Taylor Morrison’s control. Financed Buyer is encouraged to independently determine which loan programs are best for them.