For most people, buying a home will be the biggest financial investment in life. Since 99% of us are unable to buy a home, we need to buy a home mortgage from a bank or other financial lending institution. There are many mortgage options out there, and an inexperienced home buyer feels overwhelmed when they see hundreds of thousands of dollars and decades of commitment. This article should serve as a simplified guide to different types of home mortgages to educate buyers.
Some different types of mortgages include fixed rate mortgages, adjustable rate mortgages, government guaranteed loans, and regular mortgages.
Fixed rate mortgages have exactly the same interest rate over the life of the loan. This means that the monthly payments you make to your bank will be exactly the same every year, year after year. These types of loans are usually packaged for loans of 15 or 30 years. The 15-year package usually pays more than the 30-year package because it must be paid in a shorter period of time.
Adjustable rate mortgages, or ARM, are loans that vary according to market interest rates. Some ARMs remain fixed for a certain number of years and then switch to an adjustable rate, while some ARMs have an adjustable rate in the initial year and then remain fixed. These are hybrid ARMs. An example of a hybrid car is a 5/1 ARM loan, which has a fixed interest rate for the first five years, after which the interest rate will be adjusted to the market each year.
Traditional loans simply mean that it is not supported by the government. A government-guaranteed loan is a government-backed loan that includes a borrower who defaults on the borrower. There are several different government-guaranteed loans; VA loans, FHA loans, USDA / RHS loans.
The VA loan is a loan provided by the US Department of Veterans Affairs. Va loans are provided to former or current military personnel and their families. A big advantage of this type of loan is that the borrower can get a 100% loan in advance, which means there is no down payment.
The FHA loan is a loan from the Federal Housing Administration and is managed by the Ministry of Housing and Urban Development [HUD]. This type of loan allows you to pay a very low down payment, down to 3.5% of the total loan, which unfortunately means you have to pay more for monthly payments.
The USDA/RHS loan is a loan from the US Department of Agriculture, which is regulated by the Rural Housing Service [RHS]. The loan was designed for low-income borrowers living in rural areas, where it is difficult to get financial aid from traditional lenders.Click here!The Attorney's Guide To Credit Repair (view mobile). Personal Loans US,click here! Installment Loans, Click here! Auto Title Loans C,lick here!