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Different Home Loan Types & Down Payment Assistance

Buying a home is exciting, but it can be a little overwhelming when it comes to understanding how real estate financing works. Your local Envoy loan originator is ready to help you learn all the financial jargon and make you aware of any down payment assistance loan programs available to you for your unique financial situation.

Most popular home loan types

There are many different home loan types available for you to choose from. However, depending on your financial goals, there may be some that are better suited toward your income, property location and credit score. Here is a list of some of the most popular home loan types and who should apply for them.

Traditional/Conventional

Conventional home loans are a great option if you have a solid credit score and very little debt. With this option, you might be able to avoid paying private mortgage insurance cost (PMI) by providing a 20% down payment. However, you can still make a minimum down payment as low as 3%.

VA

VA home loans are a loan option available to American Veterans and their family members. Usually, private mortgage insurance and down payments are not required to apply for a VA loan, but a VA funding fee may be charged unless exempt. This makes the VA loan a flexible mortgage option for military men and women.

Fixed Rate vs Adjustable Rate

Fixed-rate loans offer you the ability to maintain the same interest rate and payment over the life of the loan. With this loan type, you can also budget other necessary expenses month to month. A fixed-rate loan is a popular, stable and secure option if you plan to live in your new home for many years.

Adjustable Rate mortgage loans begin with a set interest rate, but once the initial period has passed, rates can vary depending on current market trends. This loan is a good option if you are looking to save money on interest payments, as they are typically set at much lower rates. Because of the lower interest payment in the first few years, you could save a lot of money if you only plan to live in your new home for a few years.

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Other Home Loan Types

There are other home loan types available to you that may fit your unique financial situation. The loans featured below can help you reach your monetary goals if you do not fit inside the financial guidelines of a traditional mortgage.

Jumbo Loan

Jumbo loans are home loans that exceed the loan limits set in place by the Federal Housing Finance Agency. Jumbo mortgages are a type of conventional mortgage that have non-conforming loan limits. This means the home loan exceeds the loan limits set by the federal government. Jumbo loans are very common in areas with a higher cost of living and usually require more documentation to qualify.

Non-Agency

A Non-Agency loan can offer flexible loan solutions if you do not fit the standard guidelines set by government or conventional loan standards. A Non-Agency loan is a loan that is not backed by any of the government agencies. These mortgage loans can usually provide extensive financing for loan amounts higher than the maximum conforming limits set by most government agencies.

USDA

This loan is funded by the U.S. Department of Agriculture and is a great choice if you plan to purchase a home in a rural area. You must purchase a home in a USDA-eligible area and meet a certain income guideline to qualify.

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Down Payment Assistance Programs

You may be eligible to receive down payment assistance when applying for a specific loan program. Down payment assistance can help you receive a financial grant that will reduce the amount you need to provide for a down payment and may even cover closing costs.

Who qualifies

There are many different down payment assistance options and qualifications for these programs and depend upon specific requirements, like loan type, location of the property, income level or profession. Here are some types of down payment assistance programs that you may be qualified for.

Types of assistance

Down payment assistance programs vary depending on the state, county or city where you currently reside. There are programs available nationwide, so the probability of you qualifying for an assistance program is very high. The amount of financing available to you varies by location and housing agency. Visit with your Envoy Mortgage loan originator for specific details and qualifications.

Here are some of the types of assistance that may be available to you:

  • Grants

If you qualify for this type of down payment assistance grant from a housing authority, it is designed to be used to pay for a down payment and/or closing costs and does not require repayment

  • Second Mortgage

This type of down payment assistance will create a second mortgage on your home and has a variety of ways for repayment in conjunction with the repayment on your first mortgage. Typically, the payments on the second mortgage down payment assistance loan is paid to the housing authority or its designated recipient.

  • Deferred Second Mortgage

If you qualify for a deferred second mortgage, the money you receive does not have to paid back until a specific time in the future, i.e. when you pay off your first mortgage or sell or refinance your home.

There are certain types of deferred second mortgages and some are completely forgiven at some point of time in the future if you follow the housing authority’s requirements regarding homeownership.

As you can see, there are many down payment assistance options to choose from and they all have different qualification and requirements. If this option works best for your financial situation, please contact your Envoy loan originator for more information about this loan option.

How much down payment assistance can I qualify for?

Down payment assistance programs have different qualifications and eligibility requirements depending on the type of assistance loan you apply for. Using a down payment assistance loan could be a substantial savings if you meet the qualifications.

Closing costs

When searching for a down payment assistance program that fits your unique financial situation, it is best to know the guidelines associated with your specific down payment assistance loan or grant. Some guidelines may allow your funds to be used for either the down payment, closing costs or both. Other down payment assistance programs may not have set rules. Check with your local Envoy loan originator to see if a closing cost grant is included in your down payment assistance program.

Down payment assistance programs can make purchasing a home very affordable and is sometimes necessary when choosing your dream home. At Envoy, we help you choose the right loan program, so you can realize the dream of homeownership no matter your background or financial situation. Our robust list of down payment assistance programs helps us expand our mission of homeownership. Speak with your local Envoy loan originator to discuss your pathway to homeownership!

 

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