There are plenty of Americans who desire to have their own home. It is a goal that plenty of Americans try to achieve everyday. You probably want to purchase a house also. However, if you are like most people, you probably do not have enough cash on hand to pay for a home. Normally, a person has to get an approved loan to make this kind of purchase. Luckily, you have a lot of mortgages to choose. This article will discuss some of the mortages that are available, in addition to some of their characteristics.
Fixed Rate Mortgage
The most popular and known type of mortgage is the fixed rate mortgage. The reason that so many people like this type of loan is because it is so stable. Monthly payments will not change over the course of the loan, unless the changes are made voluntarily. With a fixed mortgage, you have the same rate of interest over the life of the loan. During the loan, the rate of interest will never go up or down.
Most home buyers will choose a 30 year mortgage. But, there are some home buyers who want a loan for 15 years too. So, if you take a loan with a fixed rate mortgage, you will have the same monthly payment for 15 or 30 years. This is why a lot of people want to get fixed rate mortgages. This is not that hard to budget through the years. You always know how much is payable each month. You do not to stress out about the interest rate changing.
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 usually gain approval for these loans, but plenty of times they only have to have a down payment of three percent. This is because these mortgages are backed by the FHA. Basically, it is much simpler to get approval for a mortgage that is guaranteed by the FHA than other types of home loans.
Veterans Administration Loan
A VA loan is another type of fixed rate mortgage loan that is backed by the Federal Housing Administration. There are basically two types of people who will get approval for this kind of loan. First, you have to be an current member of the military. The next type is a person who has to be a surviving spouse of someone who served in the military. There are plenty of times in which a person can get this type of VA loan and never have to put a down payment down.
Traditional Adjustable Rate Mortgage
An ARM does not give a homeowner the same amount of stability that a FRM provides. The interest rate on a adjustable rate mortgage will change according to the current market rate. As a result, your monthly payment will always change based upon whatever the current market rate may be. Some adjustable rate mortgages have a limit on the amount of interest adjustments that are allowed.
Do not forget that your monthly loan payment is the combined amount of principle and interest. The principle does not change, but the interest changes based upon the current market rate. Even though a majority of people do not like this specific feature when it comes to ARMS, but this kind of mortgage is still a good way to get more value or home for the money that you are dishing out. This is one of the key reasons that adjustable rate mortgages are so popular. 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 handle. But, the final payment is one huge lump sum amount. The homeowner has to pay this bit amount at one time or make arrangements to get another loan with better financing.
Interest Only Loans
Interest only loans mean that you only have to pay the monthly interest on the loan. Then you will be required to pay monthly payments for both the principle and interest. Similar to a balloon mortgage, this type of loan is easy to pay until the end of the loan or when the loan fluctuates.
In conclusion, these are a few of the home mortgages that are on the market. It might be harder to qualify for some than others. But they are there to help you achieve your dream of purchasing a new home.
Fixed Rate Mortgage
The most popular and known type of mortgage is the fixed rate mortgage. The reason that so many people like this type of loan is because it is so stable. Monthly payments will not change over the course of the loan, unless the changes are made voluntarily. With a fixed mortgage, you have the same rate of interest over the life of the loan. During the loan, the rate of interest will never go up or down.
Most home buyers will choose a 30 year mortgage. But, there are some home buyers who want a loan for 15 years too. So, if you take a loan with a fixed rate mortgage, you will have the same monthly payment for 15 or 30 years. This is why a lot of people want to get fixed rate mortgages. This is not that hard to budget through the years. You always know how much is payable each month. You do not to stress out about the interest rate changing.
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 usually gain approval for these loans, but plenty of times they only have to have a down payment of three percent. This is because these mortgages are backed by the FHA. Basically, it is much simpler to get approval for a mortgage that is guaranteed by the FHA than other types of home loans.
Veterans Administration Loan
A VA loan is another type of fixed rate mortgage loan that is backed by the Federal Housing Administration. There are basically two types of people who will get approval for this kind of loan. First, you have to be an current member of the military. The next type is a person who has to be a surviving spouse of someone who served in the military. There are plenty of times in which a person can get this type of VA loan and never have to put a down payment down.
Traditional Adjustable Rate Mortgage
An ARM does not give a homeowner the same amount of stability that a FRM provides. The interest rate on a adjustable rate mortgage will change according to the current market rate. As a result, your monthly payment will always change based upon whatever the current market rate may be. Some adjustable rate mortgages have a limit on the amount of interest adjustments that are allowed.
Do not forget that your monthly loan payment is the combined amount of principle and interest. The principle does not change, but the interest changes based upon the current market rate. Even though a majority of people do not like this specific feature when it comes to ARMS, but this kind of mortgage is still a good way to get more value or home for the money that you are dishing out. This is one of the key reasons that adjustable rate mortgages are so popular. 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 handle. But, the final payment is one huge lump sum amount. The homeowner has to pay this bit amount at one time or make arrangements to get another loan with better financing.
Interest Only Loans
Interest only loans mean that you only have to pay the monthly interest on the loan. Then you will be required to pay monthly payments for both the principle and interest. Similar to a balloon mortgage, this type of loan is easy to pay until the end of the loan or when the loan fluctuates.
In conclusion, these are a few of the home mortgages that are on the market. It might be harder to qualify for some than others. But they are there to help you achieve your dream of purchasing a new home.
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Before you think about applying for a home loan you should research thoroughly and Home Finance Assistance is the best place to start.
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