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Understanding Mortgage Products in Georgia

By Mary Lamphere

In Georgia, there are a number of mortgage products available to assist home buyers in securing adequate home financing that meets their unique needs. Each type of mortgage has its own benefits and drawbacks which may or may not affect the needs of the borrower. Some borrowers will qualify for more than one type of mortgage product and must make a decision as to which produce is going to be most suitable for them while others may have more limited options available based on their income, credit worthiness or other factors. Different mortgages meet different needs and the benefits of each should be considered before applying for the loan.

Conventional Mortgages

Also called a prime mortgage, conventional mortgages are the most common mortgage product and are typically reserved for those with relatively good credit history. The conventional mortgage is not insured or guaranteed by a government agency which makes it a little more challenging to have approved by the underwriter but also less expensive than various other mortgage types. Customers who have good credit and who are looking for favorable rates should consider a conventional mortgage before seeking other options.

Unfortunately, there are some drawbacks to the conventional mortgage. Typically, borrowers must have substantially more money as a down payment or they will have to have at least 20% in home equity in order to purchase. What this means is that if the borrower does not have the down payment, the home must appraise at 20% higher than the amount that the borrower is financing in order to be approved. Credit, income, down payment and other documentation requirements often hold borrowers up from securing conventional mortgage funding.

Government Mortgages

A number of mortgage products that are guaranteed or backed by the government are available in Georgia. Probably the two most common types of government backed mortgages are FHA and VA mortgages. These loans are made by private lenders but they are backed by a state bond or government program which guarantees to the lender that the loan will be paid, even if the borrower doesn't pay and the home forecloses.

These loans are typically easier to qualify for and have interest rates that are similar to those of a conventional mortgage though rates may be slightly higher in some cases. Buyers in search of a mortgage with a low down payment who have served in the military or armed forces, meet certain income restrictions or otherwise meet the terms of the mortgage application process may benefit from this type of loan product.

Commercial Mortgage Products

For major purchases of multi-family properties, hotels, office space or retail shops the lender will offer what is known as a commercial mortgage. These mortgages usually have variable terms, interest rates and deposit requirements based on the borrower's credit worthiness, down payment and the intended use of the property. Commercial mortgages cannot be used to purchase a single family home or residence.

Subprime Mortgages

A subprime mortgage is a type of loan that is provided to those with poor credit. These borrowers would not be able to qualify for a conventional loan and may not qualify for government backed lending based on income or other factors. Various types of subprime mortgages are available including the Adjustable Rate Mortgage which typically provides lower interest rates in the beginning but will later adjust to a much higher rate increasing the monthly mortgage payments substantially.

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