Gone are the days of only three main mortgage loans, the fixed-rate conventional, the FHA and the VA loans. Now you can be forgiven for becoming somewhat dizzy just contemplating the many loan choices available to buyers. To help you sort things out, take a look at the choices you might encounter when looking for financing for your home purchase.
Fixed Rate Mortgages
- Conventions loans: This old favorite has been around a long time, and is still very popular. Now, however it comes in various term lengths, such as 5, 10, 15, 20, 30, 40, and even 50 years.
- FHA loans: The Federal Housing Administration offers government-guaranteed loans that are aimed at first-time home buyers who may not have enough money for a large down payment. Additionally, these loans have less stringent credit requirements than that of conventional loans.
- VA loans: Another government loan, this one is aimed at veterans who have served their country. Additionally, some spouses of deceased veterans may be eligible for these loans. Funded by a conventional lender, they require no down payment.
Interest Only Mortgages
The title of this type of mortgage is a bit misleading, since the home buyer does not pay only the interest part of the loan. Instead, these loans usually come with an option to pay the interest part only for a certain period of time. In some cases, there are interest only loans that come with a balloon payment at the loan's maturity.
Option ARM (adjustable rate mortgage): These can be a bit complicated, since the interest will fluctuate, but additionally, the buyer may choose to exercise several different options and rates. Make sure you are not caught off guard by negative amortization.
Combo and Piggyback Mortgages
Two loans are at play here, a first and a second mortgage. These may be fixed-rate or adjustable or a combo of the two. These are often used to avoid having to pay private mortgage insurance when the buyer has less than the required amount for a down payment.
Adjustable Rage Mortgages
These types of loans have fluctuating rates, and the fluctuations can be monthly, semi-annually, yearly or fixed for a certain amount of time before it fluctuates.
Here, the home buyer, the home seller or the lender pays extra fees upfront to lower the interest rate of the loan.
Streamlined-K mortgages: A variation on the FHA loan, this allows the buyer to roll home repair funds into the home loan. Since most FHA loans (and really, all mortgage loans) have basic requirements for a home to fulfill, this allows buyers to get the home up to par without having to spend their own funds.
To learn more and to locate your dream home, speak to a real estate agent today, such as from Berkshire Hathaway HomeServices Fox & Roach Realtors.