Do you want to buy a home? Whether it’s the first time or you’re a seasoned homebuyer, you’ll want to get the best mortgage for your needs. Applying for a mortgage is a daunting task as so many different types of mortgages are available on the market. It is tough to know which one is the best for you.
Mortgage lenders in Missouri offer many different types of loans to suit the needs of their borrowers. Some common mortgage types are fixed-rate, adjustable-rate, jumbo, and more. Each type of mortgage has its own benefits and drawbacks, so it’s essential to understand what each entails before deciding.
Here, we’ll explore the different types of mortgages and help you decide which one is the best for you.
The Hunt for a Mortgage Begins
The best type of mortgage for you depends on your individual needs and financial circumstances, so you can buy the home you want while also keeping your payments affordable.
Ask yourself the following questions to help narrow down your options:
- How much money do you have set aside for a down payment?
- What is your credit score?
- Do you plan on staying in your home for a long time, or do you think you’ll move soon?
- What is the maximum monthly cost of your mortgage that you can afford?
Once you’ve decided what you want, it’s time to start looking for the best mortgage rates and terms.
Types of Mortgages
- Conventional Mortgage: Best for buyers with good credit and a sizable down payment.
- Fixed-rate Mortgage: Best for buyers who want predictable monthly payments and don’t plan on staying in their home for more than 10 years.
- Adjustable-rate Mortgage (ARM): Best for buyers who want a lower initial monthly payment and plan on staying in their home for more than 10 years.
- FHA Mortgage – Best for buyers with low credit scores or little money saved for a down payment.
- VA Mortgage: Best for buyers who are Veterans or active-duty military members.
- USDA Mortgage: Best for buyers who live in rural areas.
- Jumbo Mortgage: Best for buyers who want to purchase an expensive home or live in a high-cost housing market.
Now you know a few more about the different types of mortgages, it’s time to decide which mortgage companies have the best mortgage for you.
Conventional Loan
A conventional mortgage is a loan that the government does not back. Conventional loans in Missouri are offered by private lenders and usually require a good credit score and a decent down payment. They come in both fixed-rate and adjustable-rate varieties.
Conventional Loan Pros
- You can put down as little as three percent.
- The interest rates are usually lower than other types of loans.
- Loan term: 30 years
- Loan Amount: 1 unit $424,100, 2 unit $543,000, 3 unit $656,350, 4 unit $815,650
- There is no upfront mortgage insurance cost.
Conventional Loan Cons
- You require a good credit score to be eligible for the greatest interest rates.
- If you have a down payment of less than 20%, you’ll be required to pay for private mortgage insurance (PMI).
Fixed-Rate Mortgage
A fixed-rate mortgage is a mortgage loan in which the interest rate stays the same for the loan duration. It is a good choice for buyers who want predictable monthly payments and don’t plan on selling or refinancing their homes within the next 10 years.
Fixed-Rate Mortgage Pros
- The monthly payments are predictable and won’t change over the life of the loan.
- The interest rate is lower than an adjustable-rate mortgage.
- You can lock in a low-interest rate if rates are rising.
Fixed-Rate Mortgage Cons
- If interest rates fall, you’ll miss out on lower monthly payments.
- You may have to pay more interest rates if you have a low credit score.
Adjustable-Rate Mortgage (ARM)
An adjustable-rate mortgage (ARM) is a loan where the interest rate can change at any time, usually every 1-7 years. This is a good choice for buyers who want a lower initial monthly payment and plan on staying in their home for more than 10 years. However, it’s important to note that the interest rate will eventually rise, so your monthly payments could also increase.
Adjustable-Rate Mortgage Pros
- The initial interest rate is lower than a fixed-rate mortgage.
- You could save money if interest rates go down.
Adjustable-Rate Mortgage Cons
- Your monthly payments could increase as interest rates go up.
- You’ll have to pay for private mortgage insurance (PMI) if you have less than a 20% down payment.
FHA Loan
FHA loans Missouri is best for borrowers who have low credit scores or little money saved for a down payment. The Federal Housing Administration is a government agency that insures mortgages. It means that if you default on your loan, the FHA will
pay the lender back. FHA loans come in both fixed-rate and adjustable-rate varieties.
Fha Loan Pros
- You can put down as little as three percent.
- You can have a credit score as low as 580.
- Rates are typically lower than those on other loans.
- You can get a loan with lenient credit requirements.
- Loan terms: 30 years
Fha Loan Cons
- You’ll need to pay for mortgage insurance.
- The loan limits are usually lower than conventional loans.
- The home needs to be used as your primary residence.
VA Loan
A VA loan is a mortgage loan guaranteed by the U.S. Department of Veterans Affairs (VA). This kind of mortgage loan is only available to veterans, active-duty service members, reservists, and eligible spouses. It is best in Missouri for borrowers who want to buy a home with no money down. Missouri VA loans come in both fixed-rate and adjustable-rate varieties.
VA Loan Pros
- You can buy a home with no money down.
- You don’t need to pay for private mortgage insurance (PMI).
- The interest rates are low.
- You can get a loan with lenient credit requirements.
- Loan terms: 30 years
VA Loan Cons
- Minimum service requirements must be met.
- There is a funding fee that you should pay.
- The home must be used as your primary residence.
USDA Loan
The U.S. Department of Agriculture offers a USDA loan. This type of loan is only available to borrowers looking to buy a home in a rural area. The program is meant to help buyers who have a low or moderate-income. USDA lenders in Missouri help borrowers find a property in an eligible area.
Usda Loan Pros
- No loan limits.
- The credit score starts at 640.
- Low-interest rates.
- Fees can be rolled into the loan.
- Loan terms: 30 years
Usda Loan Cons
- The home should be in a rural area.
- Borrowers must have a low or moderate-income.
Jumbo Loan
A jumbo home loan is a larger mortgage loan than the conforming loan limits set by the Federal Housing Finance Agency (FHFA). Therefore, it falls into the nonconforming loan category. This type of loan is best in Missouri for borrowers who are looking to buy a high-priced home.
Jumbo Loan Pros
- You may borrow more money to acquire a more costly property.
- Rates for conventional loans are typically competitive with those of other conventional loan options.
Jumbo Loans Cons
- Jumbo loans come with higher interest rates.
- You may be required to make a larger down payment of at least 20%.
- There may be a restriction on the number of lenders who offer jumbo loans.
Freedom Loan
The Freedom Loan is designed for responsible homeowners with good credit and equity in their houses. It is an exclusive loan of A1 Mortgage in Missouri that you can pay your mortgage off in as little as 10 years with no penalty. Missouri mortgage lenders will help you find the best Freedom Loan program for you.
Freedom Loan Pros
- Loan amount ups to $2,000,000.
- No penalty for early payoff.
- Interest rates as low as 5%.
- 10-year term with monthly payments.
Freedom Loan Cons
- Not available in all states.
Conclusion
Now that you know, there are a variety of mortgage options available to borrowers in Missouri. When it comes to choosing a mortgage, it is essential to consider your needs and goals. You are not solo in your decision-making process. Mortgage lenders are available to help you find the best type of mortgage for you.
