It is not always possible for you to buy your home by paying the entire amount in cash. Once you have passed the 1st half of the mountain which is usually finding the right home for purchase and the 2nd half of the Mountain half would be to make the funds available to complete the purchase.
People usually tend to fall into traps set by certain private lenders who offer the highest amount in a very short period of time but have a lot of hidden conditions in them. Many people do not realize these conditions and fall into the trap set by private lenders and regret it later. So it is essential for you to find the right lender with the right mortgage plan before you choose to finance your home purchase.
When you are entering into a mortgage agreement, the 1st thing you must check is the amount of the principal required and then the interest that is charged by the lender towards the loan over a period of years.
There are several types of mortgage loans available in the United States including conventional mortgage, conforming mortgage, housing administration mortgage, non conforming mortgage, veteran mortgage, and agricultural mortgage.
Since you have a variety of options available when you are in the market to find a housing loan, it is always a tedious process for you to choose the right mortgage.
All the mortgage types mentioned above are not the same. Different mortgage types have different rules which you may not be familiar with.
Conventional Mortgage Plans
Conventional mortgage plans are general mortgage loans that are not backed by the government which means you must have a history of good credit score and proper employment so that under the conventional mortgage plans you must be making a down payment of up to 3% and the remaining 97% funds will be available to you as a loan.
Most conventional mortgage plans will require you to have proper private insurance. If you have to avoid taking insurance, you must be willing to make up to a 20% down payment.
Conforming Mortgage Loans
This type of mortgage loan has a top limit set by the government. The lender even if he is willing to cannot disburse a loan amount over the limit set by the government. The loan limit set by the government for conforming mortgage loans may vary based on the state or area due to real estate pricing in that area.
Non Conforming Mortgage Loans
These are massive loans that involve disbursing a huge amount of money. If you require a huge loan for a big purchase you need to choose this type of loan. It does not have any of the limits set by the conforming loans.
You may need to make up to 20% initial payment and also show additional cash in the bank to be eligible for this type of transaction.