Buying a house is a long awaited goal of a majority of adults. It is part of the American dream that a lot of people work very hard to realize. You may also have a desire to own your own home. However, like others before you, you probably do not have enough cash on hand. Usually, most people have to take out 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 pick and their various attributes.
Fixed Rate Loan
The most popular and known type of mortgage is the fixed rate mortgage. People prefer this type of mortgage the most because it supplies stability. Your monthly payments will not adjust during the mortgage unless you actually make changes to the loan. A mortgage with a fixed rate will have the same interest for the loan duration. The origination rate is the same interest rate that the loan will honor over the life of the loan.
The favored loan duration is 30 years for the average homeowner. However, many homeowners also like to get 15 year mortgages as well. So you have the option to get either a 15 or 30 year mortgage with a mortgage that has a fixed rate. This is one of the key reasons that these types of mortgages are very well liked. You can easily budget your money for years to come. You will always know what your monthly payment is going to be. If the interest rate goes up or down, you will not have to stress out about it changing your monthly payments.
Federal Housing Administration Loans
An FHA loan is a type of fixed rate mortgage that is geared towards first time home buyers who do not have a lot of money to purchase a home. In addition to speedy 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 backs these home loans. Basically, it is much easier to get a mortgage that is guaranteed by the government than other types of home mortgages.
VA Loan
A VA loan 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 armed forces. The second is someone who is a surviving spouse of an active military member. Many times a veteran can qualify for a VA home loan, even without providing a down payment.
Traditional Adjustable Rate Mortgage
Unlike fixed rate mortgages, adjustable rate mortgages are not that stable. The interest rate on ARMs will change according to the current market rates. Basically, your monthly payment will be influenced by the prevailing interest rate. Some ARMs have a cap on the interest of the loan for life.
Do not forget that your monthly loan payment is the combined amount of principle and interest. The principle does not adjust, but the interest adjusted based upon the current 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 in the beginning can be so sought after. A regular balloon mortgage will have regular monthly payments. But, the loan is only for about five or seven years, which is extremely short term. The loan payments at the start of the loan are simple to handle. But, it is the final payment that has a huge balloon payment. The home owner has to either make one payment in order to pay off the loan, or get another loan to pay off the final amount.
Interest Only Mortgages
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 in addition to the principle. 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 on the market. Some will be harder to get than others. But they are there to help you find your dream of purchasing a new home.
Fixed Rate Loan
The most popular and known type of mortgage is the fixed rate mortgage. People prefer this type of mortgage the most because it supplies stability. Your monthly payments will not adjust during the mortgage unless you actually make changes to the loan. A mortgage with a fixed rate will have the same interest for the loan duration. The origination rate is the same interest rate that the loan will honor over the life of the loan.
The favored loan duration is 30 years for the average homeowner. However, many homeowners also like to get 15 year mortgages as well. So you have the option to get either a 15 or 30 year mortgage with a mortgage that has a fixed rate. This is one of the key reasons that these types of mortgages are very well liked. You can easily budget your money for years to come. You will always know what your monthly payment is going to be. If the interest rate goes up or down, you will not have to stress out about it changing your monthly payments.
Federal Housing Administration Loans
An FHA loan is a type of fixed rate mortgage that is geared towards first time home buyers who do not have a lot of money to purchase a home. In addition to speedy 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 backs these home loans. Basically, it is much easier to get a mortgage that is guaranteed by the government than other types of home mortgages.
VA Loan
A VA loan 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 armed forces. The second is someone who is a surviving spouse of an active military member. Many times a veteran can qualify for a VA home loan, even without providing a down payment.
Traditional Adjustable Rate Mortgage
Unlike fixed rate mortgages, adjustable rate mortgages are not that stable. The interest rate on ARMs will change according to the current market rates. Basically, your monthly payment will be influenced by the prevailing interest rate. Some ARMs have a cap on the interest of the loan for life.
Do not forget that your monthly loan payment is the combined amount of principle and interest. The principle does not adjust, but the interest adjusted based upon the current 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 in the beginning can be so sought after. A regular balloon mortgage will have regular monthly payments. But, the loan is only for about five or seven years, which is extremely short term. The loan payments at the start of the loan are simple to handle. But, it is the final payment that has a huge balloon payment. The home owner has to either make one payment in order to pay off the loan, or get another loan to pay off the final amount.
Interest Only Mortgages
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 in addition to the principle. 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 on the market. Some will be harder to get than others. But they are there to help you find your dream of purchasing a new home.
About the Author:
Before you think about taking out a home loan you should research thoroughly and Home Finance Assistance is the first place you should start.
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Unknown - Saturday, October 27, 2012
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