Types of Mortgages & Loans

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Vermont Housing Finance Agency loans offer flexible down payment requirements and reduced closing costs for Vermont home buyers. First-time home buyer requirements exist in some counties, and income and purchase price restrictions apply.

A Federal Housing Administration mortgage is backed by the Department of Housing and Urban Development. This mortgage offers the borrower the ability to contribute as little as 3.5% of the purchase price. All of the down payment can also be ‘gift money’ from a family member or friend, thus allowing a borrower with only a small amount of personal savings to purchase a home. The seller can contribute up to 6% of the purchase price to the buyer’s allowable closing costs and pre-paid expenses. FHA loans are ideal for those borrowers who may have limited down payment resources, and/or an acceptable, but less than perfect credit score, or limited credit history.

A Veteran’s Administration loan is backed by the Veteran’s Administration and the Federal government. It is similar to a FHA loan, except that you have to be a qualified veteran or military personnel. VA loans allow qualified borrowers to purchase a home with a 0% down payment versus the 3.5% on a FHA loan.

With fixed rate mortgages, there are no surprises or uncertainty about your mortgage payment. But with a fixed rate, you will pay a higher interest cost than with an Adjustable Rate Mortgage (ARM). Fixed rates deliver peace of mind while maintaining the opportunity to refinance if there is a sudden interest rate drop.

An Adjustable Rate Mortgage is a mortgage in which the interest rate is adjusted periodically according to a pre-selected index. Adjustments may occur at different intervals depending upon the loan program. Some adjust yearly, while others may stay fixed for a term of one, three, five, seven or ten years, after which they adjust yearly. The terms, adjustment schedule, and index vary by loan program. To protect the borrower, “caps” are put into place to limit the amount of payment adjustment. For example, an adjustable mortgage might have a 5% lifetime cap, meaning the rate could never exceed 5% above the start rate.

A Jumbo Mortgage, also referred to as a non-conforming loan, is a mortgage that exceeds Fannie Mae and Freddie Mac’s maximum mortgage amounts (currently $417,000). Jumbo loans often (but not always) are offered at a higher interest rate and always have increased down payment requirements.

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