4 Types of Mortgage Loans for Home Buyers
The US real estate is showing strong signs of revival. Analysts and experts alike concur in the conclusion that the sector is slowly but steadily gaining momentum and that this is a trend that will hold for the rest of the year. For prospective home buyers, this means that this is the time to do homework on home mortgage loan options and to make a move sooner rather than later.
With such positive and definite signs of the market becoming more vibrant like national home value rising, higher house prices and higher demand for turn key houses, time is of the essence. As the market becomes more brisk, every moment one waits before making a move is a moment in which home prices will be appreciating.
Choosing the right mortgage loan is very important. A home owner is more likely to be able to stay with their repayment if they choose a home and a mortgage that they can afford. There are different kinds of mortgages and an understanding of the diff
erent types of them will guide one to choosing the one that is most suitable.
Here are four types of mortgage loans for home buyers today: fixed rate, FHA mortgages, VA mortgages and interest-only loans.
Fixed rate mortgage
With this kind of home mortgage loan, one pays off the mortgage over a fix
ed period of time and at a fixed rate of interest regardless of changes and trends that may affect rates of interest so that may they go up or down. Home buyers can choose from loans paid over 10, 15, 20, 30 or even 50 years.
FHA loans are the other kind of home mortgage loan. They are insured by the government through the Federal Housing Administration. This is done through mortgage insurance which is funded into the loan. It is a good choice for first time home buyers who can take advantage of incentives like low or no down payments and lowered or no credit score requirements.
The VA home mortgage loan is also government issued. It is given to former US
veterans and it may also be issued to the spouses of deceased veterans. The requirements are different and there are different criteria used to decide who qualifies for the loan. This includes factors like the years one served and if their discharge was honorable or not.
The greatest benefit is that a down payment is not required. The Department of Veteran Affairs guarantees the loans but they are funded by a conventional lender.
Interest Only Mortgages*
Interest is charged on every kind of home mortgage loan. However, this loan is so called because a borrower has the option to only pay the interest charged on a loan. This option is only available with this kind of loan and it given for only a specified period of time.
There are also some junior mortgages that are interest only where a borrower is required to make a balloon payment which is the amount borrowed which is calculated on maturity. The loan is also sometimes called balloon mortgage loans.
Get it right
A home is one of the best and also most expensive assets one can own. A big part of getting it right is choosing the home mortgage loan that best suits one depending on income level, whether it is weekly or monthly, fixed or variable and how stable it is. Being realistic about what one can and can’t afford is also important in avoiding defaulting and facing possible repossession and foreclosure. There is always the option to sell and buy a bigger or better home later on.
Download "The Only Mortgage Loan Options Guide You Need" for a closer look at these options and more.
*AmeriFirst Home Mortgage does not offer an interest-only mortgage. This is simply an example of options available for home buyers. Interest only mortgages are risky and AmeriFirst does not endorse them.
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