Mortgage Types
Understanding the different types of mortgages available to help you choose the right one for your situation.
Conventional Loans
The most common loan type, often requires good credit.
| What It's About | Is This For Me? | Key Feature |
|---|---|---|
| These loans are not guaranteed or insured by the government. They adhere to the guidelines set by Fannie Mae and Freddie Mac. | Ideal for buyers with strong credit (typically 620+) and those who can afford at least a 3% to 5% down payment. | If your down payment is less than 20%, you must pay Private Mortgage Insurance (PMI), which is removed once you reach 20% equity. |
The Lender Difference: Why Shop Around
It's crucial to understand that not all 30-year Fixed Conventional Loans are the same. Different lenders (banks, credit unions, and mortgage brokers) have different:
- •Products: One lender might offer a specific 3% down product with slightly easier qualifying rules than another.
- •Pricing: Interest rates and closing costs can vary significantly, even on the same day for the same loan type.
- •Underwriting: Some lenders are better equipped to handle unique properties common in Vermont (e.g., land with outbuildings or properties with unique water/septic setups).
2. FHA Loans
Government-insured loans, great for first-time buyers.
| What It's About | Is This For Me? | Key Feature |
|---|---|---|
| Insured by the Federal Housing Administration (FHA), making them less risky for lenders. This allows for lower credit scores and smaller down payments. | Excellent for first-time buyers or those with lower credit scores (as low as 580) and a minimum 3.5% down payment. | Requires Mortgage Insurance Premium (MIP) for the entire life of the loan if the down payment is under 10%. |
3. VA Loans
For eligible veterans, active-duty service members, and select spouses.
| What It's About | Is This For Me? | Key Feature |
|---|---|---|
| Guaranteed by the Department of Veterans Affairs (VA). This is a tremendous benefit for our military community. | Must have qualifying military service. The best part is no down payment is required, and there is no private mortgage insurance (PMI). | There is a VA Funding Fee which can usually be financed into the loan, but this fee is waived for veterans with service-connected disabilities. |
4. USDA Loans
For rural properties and qualifying lower-to-moderate-income buyers.
| What It's About | Is This For Me? | Key Feature |
|---|---|---|
| Guaranteed by the U.S. Department of Agriculture (USDA) to promote homeownership in rural and suburban areas. | Great for buyers purchasing in designated rural areas (which covers much of Vermont!) who meet specific income limits. | Allows for zero down payment (100% financing) for eligible buyers. |
Fixed-Rate vs. Adjustable-Rate
Beyond the lender or government guarantee, mortgages are defined by how the interest rate behaves:
| Type | How It Works | Best For |
|---|---|---|
| Fixed-Rate Mortgage | The interest rate is locked in for the entire life of the loan (e.g., 15 or 30 years). Your principal and interest payment never changes. | Buyers who plan to stay in their home long-term (10+ years) and want predictable monthly payments. |
| Adjustable-Rate Mortgage (ARM) | The rate is fixed for an introductory period (e.g., 5, 7, or 10 years), then adjusts periodically based on market rates. | Buyers who plan to move or refinance before the fixed period ends or who expect their income to rise significantly later. |
Need Help Choosing the Right Mortgage?
Our team is here to help you understand your options and find the best mortgage for your situation.