Fixed Rate Loan
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. Monthly payments will not change over the course of the loan, unless the changes are made voluntarily. A fixed rate mortgage has a rate of interest that cannot be changed over the course of the loan. During the loan, the rate of interest will never go up or down.
Most home buyers prefer a 30 year mortgage. But, there are those 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 one of the key reasons that these types of mortgages are very well liked. This is not that difficult to budget through the years. You always know how much is due each month. You don't have to stress out about the interest rate changing.
FHA Loans
FHA loans were created for people who are first time buyers or people who do not have much money to put on a new home purchase. Not only are first time home buyers usually approved for these loans, but they only have to come up with a three percent down payment. This is due to the fact that the Federal Housing Administration guarantees these home loans. All in all, a FHA loan is much easier to obtain than a traditional fixed rate mortgage.
VA Mortgage
A VA loan is a different kind of fixed rate loan that is guaranteed by the FHA. There are basically two types of people who will obtain this kind of loan. The first one is someone who has served in the military. The next type is a home buyer who has to be a surviving spouse of a person who served in the military. Plenty of times a veteran can get a Veteran's Administration home loan without putting any money down.
Traditional ARM
Unlike fixed rate mortgages, adjustable rate mortgages are not that stable. 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 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 monthly principle will remain the same, but the interest will continue to adjust if the market rate changes. This is one of the things that people despise about ARMs, but it is still one smart method to get more house for the money that you pay. 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 extremely short term. The loan has decent payments at the beginning of the loan. But, the last payment is the one that blows up into a onetime large payment. The homeowner can opt to obtain a new loan or make this huge payment.
Interest Only Loans
With an interest only loan, you will have to pay only the interest on the loan for a certain amount of years. Then after a certain time, you will pay all of the loan, which includes the interest as well as the principle. It is the loan adjustments that make both balloon and ARM loans difficult to take care of in the very end.
In conclusion, these are just a few of the types of home loans that are available. It might be harder to qualify for some than others. But, they are available to help you get a new home.
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