When you’re ready to buy a home, you don’t want to let the perfect house get away because you haven’t familiarized yourself with financing options. In fact, identifying the right type of mortgage loan before you start house hunting is an important step in making the most well-informed decision.
In this guide, we'll explore popular mortgage products available at Arbor Financial Credit Union. Once you're done reading, if you are ready to take the next steps or have questions about which option suits you best, our mortgage specialists are extremely knowledgeable and here to help. We're here to help you make informed decisions about your home financing needs!
Different Types Of Mortgage Loans
Choosing the right mortgage loan involves a careful review of the various types of mortgage loan programs available and their features. The best mortgage loan for you should be flexible, affordable, and meet your individual needs.
Learn more about the different types of mortgage loans.
Fixed-Rate Mortgage
Gain a stable monthly payment with a fixed-rate mortgage.
This loan option provides predictability and stability. A fixed-rate mortgage also comes with flexible terms and low fees.
Depending on your credit history, you can access a fixed-rate mortgage for 10 to 30 years. Choose the time frame that fits your current and projected future earning potential.
Note that a fixed-rate mortgage locks you into an interest rate. You must refinance the loan to take advantage of lower interest rates that become available in the future.
Learn More About Fixed-Rate Mortgages
FHA Loan
Even with a low credit score or no credit history, you could afford to buy a home thanks to an FHA Loan.
Available to first-time buyers, this special type of mortgage loan is made available through the federal government.
If you qualify for an FHA loan, you gain competitive interest rates and can even ask a family member or friend to co-borrow with you. Your down payment will total only 10% if your credit score falls between 500 and 580 and could be as low as 3.5% if your credit score is above 580.
You can also choose flexible terms and a fixed interest rate for 15 or 30 years. Low closing costs add to the attractiveness of an FHA loan.
Jumbo Mortgage
Use a jumbo mortgage loan to afford a large home that fulfills your sophisticated desires or accommodates your growing family.
A jumbo mortgage covers loans of $806,500 to $2 million. The loan features low interest rates and low closing costs. You have the choice to select terms of 15, 20, or 30 years.
While attractive, a jumbo mortgage requires a loan-to-value maximum of 80%. Also, ensure you can continue to afford the monthly payments as you prepare to buy your large home.
Learn More About Jumbo Mortgages
Construction Loan
Build a customized home with assistance from a construction loan. This type of mortgage loan helps you save money as you create a brand-new house.
With a construction loan, you pay for the home construction and your mortgage in one easy payment. The result is lower fees, one-time closing costs, and less stress. Additionally, you’ll only pay interest on the loan during the construction phase and enjoy a low fixed interest rate and flexible financing terms of 10 to 30 years.
Because construction costs can vary and may grow as the project progresses, finalize your house plans before you apply. Then, make sure you can afford the monthly payments that will begin after the construction period ends. To learn more about the construction loan process, click here. Click below to learn about our loan product specifically.
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Renovation Loan
Whether you’re moving into a fixer-upper or the house you love needs a few minor updates, consider a renovation loan. These funds allow you to purchase and improve your house right away and then pay for the renovations over time.
A renovation loan includes your home’s purchase or refinance costs and improvement costs. It covers non-structural improvements that total less than $50,000. For details on the types of improvements that are covered, talk to your lender.
Renovation loan terms can include a low fixed interest rate. Take advantage of flexible financing terms of 10 to 30 years. One-time closing costs add value to the loan and lower costs.
Carefully plan out your renovations before you apply for a renovation loan. To protect your finances, you may need to wait until this loan is repaid before applying for additional renovation funds.
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Adjustable Rate Mortgage Loans (ARMs)
Adjustable-rate mortgages offer initial lower interest rates that adjust periodically based on market conditions. This means that your rate can go up or down depending on the rate environment when your term is set to adjust. This product is usually recommended to families and individuals who move often or don’t plan on staying in their new home long-term.
With an ARM, you will get rate adjustment periods of 3, 5, 7, or 10 years. After this time frame, your rate adjusts every six months based on an index and margin. While the initial rate may be lower, you should be prepared for potential rate increases after your initial fixed-rate period.
Learn More About ARMs
Bridge Loan
To afford a second home while you try to sell your current home, a bridge loan may be your best bet. Rather than miss out on the deal while you try to sell your existing home, use this option to purchase your dream home even if you don’t have the down payment.
Pay only interest for a manageable term of up to 12 months with a bridge loan. First, the mortgage company will appraise your current home and calculate your existing equity. You can then borrow up to 80% of the equity for a down payment on a second house. Your bridge home is paid off when you sell your current home.
To qualify, you must have adequate equity or credit and be ready to purchase a new home. You also have only 12 months to find a new house.
Learn More About Bridge Loans
Physician Mortgage
Put your profession as a doctor, dentist, pharmacist, or veterinarian to good use when you buy a house. A physician mortgage offers special terms to medical professionals.
With a physician mortgage, obtain financing of up to 100% for a single-family house or 90% for a condominium. Low closing costs and competitive interest rates are available for this 15, 20, or 30-year loan. As a bonus, make no private mortgage insurance (PMI) payments.
For details on how to qualify for a physician mortgage, talk to your lender.
Learn More About Physician Mortgages
3% Down Mortgage
Reduce your upfront costs with a low down payment.
A 3% down mortgage makes it easier for you to achieve your dream of home ownership. You also can finalize your purchase quicker. This loan option is ideal for new or first-time home buyers with limited savings. It allows you to select a 15, 20, or 30-year term.
Because you put less money down upfront, your total loan payments could be high. Verify that you can afford the monthly payments.
Learn More About 3% Down Mortgages
Michigan State Housing Development Authority (MSHDA)
Arbor is one of the few certified partners of MSHDA, allowing us to help our members more by adding an option for downpayment assistance.
Qualified borrowers can get up to $10,000 to help with closing costs, down payments, or prepaid expenses. MSHDA also allows qualified members to claim a Mortgage Credit Certificate (MCC). MCC is a tax credit that will enable borrowers to credit 20% of their annual mortgage interest on their taxes for up to 30 years.
If you are looking at any of the above mortgage options, it's worth talking to your mortgage loan specialist to see if you qualify!
Learn More About MSHDA
Deciding On The Right Type Of Mortgage Loan
The excitement of buying a home includes choosing a mortgage and a lender you can trust.
At Arbor Financial Credit Union, our team of lending professionals is ready to help you find the right type of mortgage loan for your needs. We offer numerous mortgage loan options for any budget and look forward to assisting you in financing your dream home. For more information about buying your first home Download our first-time homebuyer e-book.
Get an instant, free mortgage quote to get an idea of what your monthly payment could be.
