Acquiring for a mortgage loan is a big financial decision that really has a great impact in your life. So before making your final choice, as mortgage loaner, you need to know the different types of mortgage loans to know the best for you. Here then are some of the types of mortgage loans for you.
As the name implies, a fixed-rate mortgage is a type of mortgage loans that offers an interest rate the never changes until the loan is paid. It is one of the most common and arguably the most popular mortgage loan as its main advantage is that even if the interest rate increases in the course of your loan, your rate when you first applied for the loan will remain the same.
The ‘term’ of the fixed-rate mortgage can either be for 15, 20 or 30 years. And as always, they each have their own advantages and disadvantages. A 15-year fixed-rate mortgage loan permits the loaner to pay off their loan in a much shorter time period. If you are capable financially to make this choice, do so, but also remember that this results to higher repayments per month. A 20-year fixed-rate is similar to a 30-year fixed rate with minor differences. Both have a lower monthly repayment though the former is quite difficult to find and the latter is the most common fixed-rate mortgage.
If you choose this type of mortgage loan there’s a big probability that you will start off with an interest rate that is lower than the usual. However, you have to pay attention to the key word of the loan which is ‘adjustable’. Your payment for you loan can either increased tremendously or decrease shockingly after the pre-arranged initial period. This factor depends on the conditions of the market so you need to be ready with its inconsistency.
This type of loan is a fixed-rate loan that’s short-termed. Under this type of loan, a loaner will pay small amounts for either five, seven or ten years which is called the introductory period. Once the introductory period expires, the remaining balance in the loan should be paid in whole.
There are three sub-categories in this type of loan. The first one is called Federal Housing Administration (FHA) loan. It s insured by the administration and is open to all eligible home buyers, and though there are limitations in FHA loans in terms of size, most often than not this loan covers the price of a comparatively priced house. Another type of government loans is the VA loan assured and guaranteed by the Department of Veterans Affair. This particular loan is only eligible to military veterans that have the seal of eligibility from the department. And more often that not, there’s no down payment for this loan. The third type of government loan is referred as the Rural Housing Service (HRS) loan. This loan is mainly for those who live in rural areas with low to average income.