Four Different Types of Mortgages in California

Mortgage-loan-application.jpgThe most important part of the loan process is to find the mortgage that is the best fit for you. But where should you start? There are several different loan options that you can qualify for depending on your income, credit score, and a variety of other factors.

Below you can find information about each loan and be headed in the right direction towards buying your first home.

Conventional Loan

The conventional loan is one of the most traditional mortgages in California. If you’re looking for low monthly payments and can afford to put at least 3% down, then you’re on the right track.

Conventional loans are categorized as loans that meet guidelines set forth by Fannie Mae or Freddie Mac, who provide a secondary market for mortgages. The underwriting guidelines are tighter than other types of mortgages, but the short and long term costs have significant advantages.

In addition to putting 3% down, you’ll need a good credit score and no major derogatory credit events in the past 7 years. If that’s the case, a conventional mortgage should be one of your first choices since your monthly payment could be more affordable than alternatives like the FHA loan.

USDA Rural Development Loan

Thinking about living outside the city? The USDA RD Loan is an ideal program for purchasing a rural home. This mortgage typically catches a buyer’s attention because with no minimum down payment, you can put 0% down and have less upfront costs.

However, qualifying could be tricky. First, your home must be in an eligible rural area designated by the USDA. These are typically rural unincorporated areas with under 50,000 inhabitants. Secondly, you’ll need to pass the income restrictions. The gross income limit for a USDA RD loan is $75,650 for a family of 4 or less, and $99,850 for a family of 5-8.

If you and your family make less than the maximum income limit and the home is in an eligible area, then this is a great opportunity to get a California mortgage with little to no money down.

Veterans Affairs Loan

Serving in the military comes with benefits – even for your mortgage in California. Veterans Affairs Loans are available to eligible Active, Separated, Reserves, and some National Guard Veterans of the US Military.

This program offers our nation’s military service people a no down payment loan option, with no monthly mortgage insurance, and exible underwriting guidelines. On top of that, each loan is insured by the Department of Veteran Affairs.

While this may sound like a no brainer if you’re a veteran, it is not always the best choice. If you’re in active duty and could be transferred, or non-active and plan to move in the next 5 years, it’s worth considering other options as well.

FHA Loans

Still not sold on one of these mortgage options? Then a FHA loan could be your best bet. Due to their less strict underwriting guidelines compared to Conventional Loans, FHA mortgages are a very popular mortgage in California.

Even if you’ve had credit issues or recently gone through a major financial event, you’re still in luck and have a chance to qualify. This make a FHA Loan a good option for buying your next home.

However, you should always take time to make an educated decision before choosing the best loan option for you. For more information, download our free ebook on different types of mortgages in California.

Discover what loan types are right for you in our free guide »

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