Various Kinds of Home Loans
Owning a home is a long awaited goal of most Americans. It is a goal that plenty of Americans try to achieve everyday. You might want to buy your own home as well. However, like others before you, you most likely do not have enough cash on hand. Normally, a person has to get loan approval to make this type of purchase. There are many different home loans available to choose from. The following article is going to list a few of these types of loans, along with a few of their features.
Mortgage with a Fixed Rate
The loan that most people are familiar with is the fixed rate mortgage. The reason that so many people like this type of loan is because it is so stable. The amount of money that you pay each month will not adjust unless you authorize adjustments to the loan. With a fixed mortgage, you have the same rate of interest over the life of the loan. The origination rate is the same interest rate that the loan will honor over the life of the loan.
The ideal loan duration is 30 years. But, there are some home buyers who want a loan for 15 years too. So you have the chance to get either a 15 or 30 year loan with a mortgage that has a fixed rate. This is one of the main reasons that these types of mortgages are very well liked. You can easily budget your money for years to come. You will always know what your monthly payment is going to be. There is no reason to worry about fluctuations in the market.
Reverse Mortgage
Dont forget about a reverse mortgage if you are in the market to get a loan on your home. With the unique feature of no monthly payments, you will be able to make the retirement dollar stretch further than you ever imagined.
Federal Housing Administration Loans
An FHA loan is a type of fixed rate mortgage that is geared towards first time home buyers who do not have a lot of money to purchase a home. Not only do first time home buyers generally get approval for these loans, but plenty of times they only have to have a down payment of three percent. This is due to the fact that the Federal Housing Administration guarantees these home loans. Basically, it is much easier to get approval for a mortgage that is guaranteed by the FHA than other types of home mortgages.
VA Mortgage
A VA loan is another type of fixed rate mortgage loan that is backed by the Federal Housing Administration. There are only two types of applicants who will qualify for this loan. First, you have to be an active member of the military. The next kind is a home buyer who has to be a surviving spouse of a person who was in the military. There are plenty of instances in which a person can get this type of VA loan and never have to put money down.
Traditional ARM
Unlike fixed rate mortgages, adjustable rate mortgages are not that stable. The interest rate on ARMs will change according to the current market rates. Simply put, your monthly payment will adjust according to whatever the current rate might be. Some ARMs might have caps on the interest rate for the life of the loan, but many of them do not.
Remember that your monthly payment is both the principle and interest. The principle does not change, but the interest adjusted based upon the current market rate. This is one of the things that people like the least about ARMs, but it is still one excellent way to get more house for the money that you pay. This is one of the most important reasons that adjustable rate mortgages in the beginning can be so desirable A regular balloon mortgage will have regular monthly payments. But, the loan is only for about five or seven years, which is very short term. The loan payments at the beginning of the loan are simple to manage. But, the last payment is the one that blows up into an onetime large payment. The homeowner can decide to get a new loan or make this large payment.
Loans that Allow Interest Only Payments
The loan requirements of an interest only loan mean that you only have to make payments on the interest of the loan. Then after a certain time, you will pay all of the loan, which includes the interest as well as the principle. Just like with balloon mortgages, this type of loan seems perfectly fine until the end of the loan.
Finally, these are some of the kinds of mortgages that people can pick. It will be easier to qualify some of these loans than others. But, they are there to help you achieve the ultimate dream of home ownership.
I have been instructing baby boomers on the reverse mortgage disadvantages for several years. By offering an education that isnt biased towards doing the mortgage loan, I offer an opportunity for the seniors to get educated, making it possible for them to make a good, well informed conclusion.
