MCS Mortgage offers home loans in the states of Florida, Maryland, and Virginia. Some of these loans include popular choices like VA loans, FHA loans, and USDA loans. MCS Mortgage also offers both fixed-rate and adjustable-rate mortgages. While VA, FHA and USDA loans are provided by the US federal government, fixed-rate and adjustable-rate mortgages are more varied and are provided by different types of lenders.
In contrast with adjustable-rate mortgages (ARM), which have adjustable interest rates that change over time and are influenced by market rates, fixed-rate mortgages stay the same for the duration of the loan term, regardless of current market rates. There are also many different types of fixed-rate loans, some of which include the three popular government-sponsored ones.
Amortizing
Amortizing loans are loans that are paid on a required monthly schedule. A portion of these monthly payments goes towards paying the principal owed with another portion going towards interest. This results in both a reduced balance and reduced interest over a period of time. A significant amount of fixed-rate mortgages tend to be amortizing loans.
Non-amortizing loans exist as well, though they are less common. This is largely due to non-amortizing loans having their principal amount paid in a lump sum and there is no monthly payment schedule required. While this does result in a lower interest rate at the start of the loan’s term, it also does not decrease over time. As such, non-amortizing borrowers could find themselves paying more on monthly payments than amortizing borrowers,
Conventional Fixed-Rate Mortgage
One of the most common choices of fixed-rate mortgages is the conventional fixed-rate mortgage. It’s also one of the most widely available as many banks, credit unions, online lenders and other financial institutions offer it in their services. Conventional fixed-rate mortgages tend to have lower interest rates than other fixed-rate loans and often have terms of 10 to 30 years.
Conventional fixed-rate also require a minimum 5% down payment, which may require a homebuyer to purchase mortgage insurance. To avoid paying for mortgage insurance, a minimum 20% down payment is needed. While conventional fixed-rate mortgages require less documentation than government-sponsored loans like the FHA loan, they still require a minimum credit score of 620 or higher, and a debt-to-income (DTI) ratio of 43% or lower to be approved.
Conforming Loan
Conforming loans differ from other fixed-rate loans in that they conform to the funding standards set by the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”). These two government entities determine the loan limit (which cannot be exceeded) and can require down payments as low as 3.5% like the FHA loan. A low down payment, however, could require the homebuyer to purchase mortgage insurance. Another major advantage of conforming loans is that they can be packaged and sold in the secondary market.
Non-Conforming Loan
As the name suggests, non-conforming loans are loans that don’t meet the funding standards set by Fannie Mae and Freddie Mac. This includes funding that exceeds the loan limit, which could subject a homebuyer to paying a higher interest rate and making a higher down payment. Since non-conforming loans are not guaranteed by government entities, they carry significant risks for a lender.
Government-Backed Loan
All of the government-backed loans such as FHA, VA, and USDA loans have a fixed interest rate. While qualifications for these loans vary, all three offer low interest rates and either require a small down payment or no down payment at all. Out of the three, only the FHA loan is accessible to most home buyers of low-to-moderate income. The VA loan is only available to servicemen, veterans and their eligible family members, and the USDA loan is only available to homebuyers purchasing property in rural areas.
To learn more about how MCS Mortgage can help choose the right loan for you, contact us at 833-415-LOAN or by email at Hello@MCSMLS.com.