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TYPES OF HOME LOANS
A new home may be one of the biggest purchases you’ll make in your life. Before you begin home shopping, you’ll need to explore mortgage options if you plan to finance.
Not all home loans are the same and the best one for you may not be obvious. A qualified lender can provide detailed comparisons, but it's good to know the basics so you'll know what to expect.
YOUR LENDER HELPS YOU FIND THE BEST LOAN FOR YOU
TYPES OF LOANS
Fixed Rate Loans have the same interest rate and principal/interest payment throughout the duration of the loan. The amount you pay per month may fluctuate due to changes in property tax and insurance rates, but for the most part, fixed-rate mortgages offer you a very predictable monthly payment.
A fixed-rate mortgage might be a better choice for you if you’re currently living in your “forever home.” A fixed interest rate gives you a better idea of how much you’ll pay each month for your mortgage payment, which can help you budget and plan for the long term.
You may want to avoid fixed-rate mortgages if interest rates are high. Once you lock in, you’re stuck with your interest rate for the duration of your mortgage unless you refinance.
Adjustable-rate loans (ARMs) have interest rates that fluctuate with market conditions. Many ARM products have a fixed interest rate for a few years before the loan changes to a variable interest rate for the remainder of the term. For example, you might see a 7-year/6-month ARM, which means that your rate will remain the same for the first seven years and will adjust every six months after that initial period. If you consider an ARM, it’s essential to read the fine print to know how much your rate can increase and how much you could wind up paying after the introductory period expires.
A reverse mortgage loan allows older homeowners to borrow money using their home as security for the loan. Using that loan to purchase a home is called a Home Equity Conversion Mortgage (HECM). With an HECM, you don’t make monthly mortgage payments. The loan is repaid when you no longer lives in the home. Interest and fees are added to the loan balance each month and you will pay property taxes and homeowners insurance. You must use the property as your principal residence and keep the house in good condition.
On an interest-only loan, you only pay the interest on the loan for a certain period of time. The principal is repaid either in a lump sum at a specified date, or in subsequent payments. While interest-only mortgages mean lower payments for a while, they also mean you aren't building up equity, and mean a big jump in payments when the interest-only period ends.
These are the most common loans. Talk to a lender as soon as possible to determine the best one for you!
Not sure where to start? Contact me - I'm here to help!
TYPES OF MORTGAGES
CONVENTIONAL
A conventional loan is any mortgage loan that is not insured or guaranteed by the government. They are typically a good fit for borrowers with good or excellent credit.
Conventional mortgage loans can be fixed-rate or adjustable-rate mortgage loans, including the 30-year fixed, 15-year fixed, hybrid ARMs, interest-only loans, and so on. More...
GOVERNMENT
FHA Loans are insured by the Federal Housing Administration (FHA) and generally have more flexible qualification criteria than conventional loans . These loans make home buying possible for buyers with lower credit and require a lower down payment. More...
VA Loans are also insured by the US government through the U.S. Department of Veterans Affairs (VA) and cater to active-duty military, veterans and surviving spouses. VA loans don't require a down payment or mortgage insurance, but there is a funding fee which varies based on home much you put down and whether you’ve gotten a VA loan before. More...
USDA Loans are insured by the United States Department of Agriculture. USDA loans have lower mortgage insurance requirements than FHA loans and can allow you to buy a home with no money down. You must meet income requirements and buy a home in a suburban or rural area in order to qualify for a USDA loan.
ANNE-MARIE OLSON IS A PROUD MEMBER OF MYHOMEGROUP.