Types of Home Mortgages
In years past there were only a few types of home mortgages that one could apply for. Times change and so does the home buying market. Now it seems there are more types of home mortgages than you could possibly know what to do with. You will have to choose just one for your home purchase so it’s best to least which is which now.
Fixed mortgage rates are probably the most popular and the longest standing. Fixed rate home mortgages are available in terms from ten years all the way up to fifty years. The payment is structured in such a way that as long as the exact payment is made, the loan will be paid in full after the term ends. This type of home mortgage will also allow you never worry about your mortgage interest rate. It will remain the same no matter what the rest of the financial market does.
The government insures FHA home mortgages. The government uses its mortgage insurance to fund the loan. This type of home mortgage is perfect for first time homebuyers. It is one of the only loans on earth where your credit score doesn’t matter and the down payment requirements are quite minimal.
VA home mortgages are available only to veterans that have served in the U.S. Armed Services. In certain cases, they can also apply to spouses of deceased veterans. Requirements will include the year of service and the status of the veteran’s discharge. These requirements do change and vary by the home mortgage company. VA loans also do not require a down payment.
Adjustable rate home mortgages come in the most variety of all the different loan types. You can find an adjustable rate home mortgage in any size, shape, or color you could possibly want. It is usually identical to a fixed rate home mortgage except that the interest rate changes. It can fluctuate annually or semi-annually. Or, more commonly, it will remain fixed for a period of time before it starts to adjust with the market.
The final of the most common home mortgage types is an interest-only loan. Using that name is a bit misstated. It seems to imply that the borrower only pays interest on the home mortgage. Interest only loans do contain an option to make an interest only payment, but this option is available only during a certain period of time. Some junior home mortgages are truly interest only and require a balloon payment.
These are the types of home mortgages that you will be offered most often in the current financial market. Knowing which of these you’d most like to get can be helpful later in the application process.