Different Kinds of Home Loans

by Simon Jones on February 10, 2012

Owning a home is a very popular goal for many Americans. It is part of the American dream that a lot of people work very hard to realize.You may want to purchase your own home as well. However, if you are like most people, you probably do not have enough cash on hand to pay for a home.Usually, most home buyers have to get home loans for these types of purchases.There are many different home loans available to choose from.This article will go over some of the home mortgages that you can choose and their various attributes.

Fixed Rate Mortgage

The loan that most people know about is the fixed rate mortgage. The reason that so many people like this type of loan is because it is so stable.The monthly payment will not adjust unless you make modifications to the loan.A fixed rate mortgage will have the same interest for the loan duration.The origination rate is the same interest rate that the loan will maintain over the loan duration.

The best loan duration is 30 years. However, many homeowners also like to get 15 year mortgages as well. So, with a mortgage with a fixed rate, you can get approval for either a fifteen or thirty year mortgage.This is why a lot of people like fixed rate mortgages.This makes things much easier to budget for for over the course of the loan.You will always be knowledgeable about what your monthly payment is going to be.There is no reason to worry about fluctuations in the market.

Federal Housing Administration Loans

FHA loans were created for people who are first time buyers or people who do not have much money to spend on a new home purchase.In addition to quick approvals for first time home buyers, they only have to place a three percent down payment on their new home purchase.This is due to the fact that the Federal Housing Administration guarantees these home mortgages. Basically, it is much simpler to gain approval for a loan that is guaranteed by the government than other types of home mortgages.

VA Mortgage

A VA mortgage is a different kind of fixed rate loan that is backed by the FHA. There are only two types of applicants who will qualify for this loan.First, you must have a previous or current history of serving in the military.Second, the other type of home buyer has to be a widow or widower of an active armed forces member. Many times a veteran can qualify for a VA home loan, even without providing a down payment.

Traditional Adjustable Rate Mortgage

An ARM does not give a home buyer 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 loans have a cap on the number of interest adjustments that are allowed.

Remember that your monthly payment is both the principle and interest.Although the principle will stay the same each month, the interest portion will adjust according to the market rate. This might be one of the disadvantages of getting an ARM, but it is also the easiest way to get more house for your money.This is one of the key reasons that adjustable rate mortgages are so popular. However, the duration of the loan is usually for no more than five or seven years.The loan payments at the start of the loan are simple to manage. But, the final payment is one huge lump sum amount.The homeowner has to pay this large amount at one time or make plans to get another loan with better financing.

Loans that Require Interest Only Payments

The loan requirements of an interest only loan say that you only are required to make payments on the interest of the loan.Then you will be required to pay monthly payments for both the principle and interest.Just like with balloon mortgages, this type of loan seems perfectly fine until the end of the loan.

In conclusion, these are some of the home loans that are available. It might be harder to qualify for some than others. But, they are there to help you achieve the ultimate dream of home ownership.

Before you think about applying for a home loan you should research as much as possible and Home Finance Assistance is the best place to start.

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