When applying for a mortgage loan in Boston, it can help to familiarize yourself with the common mortgage loans offered by lenders in the Greater Boston area, to ensure that you get the best deal possible.
Common Mortgage Loans Offered by Lenders
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While different lenders offer different type of mortgage loans, the better ones will usually include all of the following:
Government Loans: Mortgage loans which are either provided by or backed i.e. guaranteed by different government agencies fall under this category. Since the lender associated risk for these loans is lower, the interest rates will also be lower. Also, if you are a first time applicant, you may qualify for special loans with excellent interest rates. Make sure to talk to your lender about these. Common government loans include:
- FHA Loans: These loans are provided by the Federal Housing Administration, whose sole purpose is to provide low interest mortgage loans to lower income and middle class families.
- USDA Loans: These loans are provided by the United States Department of Agriculture. While their initial purpose was to provide loans to develop rural America (and most of their money is used for that purpose), today due to a number of factors, they also provide funding for urban areas
Both Conforming & Non-Conforming Loans: Loans which cater to the guidelines set by Fanny Mae and Freddie Mac are known as conforming loans (since these loans can be sold to Fanny Mae and Freddie Mac, their interest rates are low). Those which are not according to the guidelines are known as non-conforming. These come with an increased interest rate because of the additional lender risk, but they can help families get homes they otherwise couldn’t borrow for.
Jumbo Loans: looking to finance a luxury condo or house in the heart of Boston? These loans are intended for you. They allow you to borrow large sums of money, but since they exceed the guidelines set by government agencies, the lender must assume all of the risk in the transaction; the interest rate will be higher, but you will have a wider range of options for luxury living.
Multi-Family Loans: If you are looking to invest or develop a large property in which more than one family can stay, and are needing financing, this may be the loan for you. The loan value can range from $700,000 or greater than $5million and are provided by both government and private agencies. Most lenders will expect a minimum of 10%-15% of the entire amount to come from your accounts. Due to the large amount of money involved, the guidelines provided are much more detailed and getting approved is a little tougher. Consult your loan officer.
3% Down Loans: Some mortgage lenders offer loans with just a 3% down payment of the loan amount. While your down payment will be lower, you will have to pay additional fees because of paying for Private Mortgage Insurance (which will act as insurance for the lender). The interest rate can also be higher.
No PMI Loans: Lenders also offer no PMI loans if you have sufficient capital to pay for 20% of the total amount as a down payment. While the amount you pay is lower, your initial down payment must also be higher.
No Closing Cost Loans: As the name suggests, these loans are created such that you will not have to pay any closing costs for it (interest rates will be higher than normal).
All of the above mortgage loans are available in Boston, Brookline, Newton MA, Sharon MA, Cambridge, Plymouth, Weston, Wellesley, and throughout Massachusetts.