Types of Home Loans
If you are in the market
for a new home, it's important that you know what type of loans are available
to you. Whether you have perfect credit,
a few financial blemishes or are just starting out in life and want to own a
home, understanding your options will prove to be invaluable during your house
Fixed Rate Mortgage
A fixed rate mortgage is
one of the most popular home loans and is commonly available as a 15 or 30 year
term. Because it offers the borrower an
assurance that both the principal and interest will remain the same throughout
the term of the loan, a fixed rate mortgage is ideal for many.
Adjustable Rate Mortgage
An adjustable rate
mortgage, also referred to as an ARM loan, is one in which the interest rates
adjust according to the current market.
This means that interest rates can either increase or decrease at
regular intervals, based on established market indexes.
An interest-only mortgage
is one that requires the borrower to pay interest only payments for a preset
number of years during the loan term.
After that initial period, the monthly payments will then adjust to
include both the principal and interest remaining on the loan.
A balloon mortgage is a
loan that requires monthly payments that do not completely repay the loan. At the conclusion of the balloon term, a
large lump-sum payment is due to pay off the balance of the loan.
An FHA and/or VA loan are
mortgages that are guaranteed by the government. An FHA loan is easier to qualify for than a
conventional mortgage, requires a lower down payment and is guaranteed by the
Federal Housing Authority. A VA loan,
which is for veterans only, is guaranteed by the Veteran's Administration.
Construction loans are
available for borrowers who are purchasing or building a newly constructed
home. These loans, which are offered at
either fixed or adjustable rates, require slightly more paperwork and inspections
than a conventional mortgage.
especially those with a limited or poor credit history, prefer to seek owner
financing when purchasing a new home.
Because there is no credit check, buyers will not be judged for past
credit problems. In addition, owner
financing may offer a low down payment requirement and competitive interest