A residential mortgage is one option to owning a home. Where many Americans would otherwise be out of luck when it comes to homeownership, a residential mortgage ensures that is possible.
So what is a residential mortgage? A residential mortgage is issued to a borrower from a lender. The borrower will put a lump sum down on the home, known as the down payment, and will be issued payment plan from the lender. Each month, a homeowner will have to meet their monthly mortgage payment.
As most Americans are unlikely able to afford to pay for the price of a home in full, residential mortgages create a pathway to homeownership. After all the agreed upon mortgage payments have been made, the borrower officially owns the home. Where you would have likely been unable to buy a home, residential mortgages have made your dream of homeownership come.
Conventional loans. Borrowers have a number of options when it comes to residential mortgages. One of those is a conventional loan. These loans are issued to a borrower directly from a lender. These are tougher to qualify for, when compared to government-backed loans, because in order to qualify for them a borrower has to be deemed credible. These loans often require a down payment of 20 percent of the home's purchasing price, helping the lender immediately build equity in their home.
Government-backed loans. A residential mortgage can also come in the form of a government backed loan. There are a few options for these types of loans.
- VA home loans. These loans are backed by the Department of Veteran's Affairs and are made for military veterans.
- FHA home loans. These loans are backed by the Federal Housing Finance Agency and are made for those who might not qualify for a conventional loan due to their credit.
- USDA home loans. These loans were created to help low- and very low-income individuals in rural obtain funding for a home.
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