It is hard to know where to begin! There are so many options that it can be very confusing to find the right type of loan. You must first ask yourself many questions. Some of these are:
The answer to these questions will help you know which loan will be best for you. There are a wide variety of loan options, so it will be useful to know some of the basic tendencies. In general:
It is also useful to understand the essential differences in types of loans. There are really only three basic types of loans:
Loans are also classified as either government loans or conventional loans.
Government loans include FHA and VA loans and the requirements and guidelines for each are different. The main difference between the two is that VA loans are designed for borrowers that either were or still are in the military.
To qualify as a conventional loan, it must fall under the guidelines established by Fannie Mae and Freddie Mac, corporations that have established industry standards and guidelines that govern credit requirements, down payment amounts and maximum loan amounts.
Once you have these general types down, you will still have to look at the individual features of specific loan types to determine which one will best meet your needs.
Your loan options can be limited by poor credit. A credit score is a system of points earned based on your credit history. This three-digit number (ranging from 300 to 900) is influenced by such factors, among others, as:
There are three major credit bureaus (Experian, Equifax and TansUnion) that produce comparable credit scores using some version of FICO, the industry standard developed originally by Fair Isaac and Company. Because this credit score is used by most lenders to determine your qualifications for a loan, you may want to see what you can do to increase your credit score before you apply for a mortgage.
So, the bottom line: Start with your credit score; end with the specific loan type that is most appropriate to your needs.