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 also have a desire to own your own home. However, like others before you, you probably do not have enough cash on hand. Normally, a person has to get an approved loan to make this kind of purchase. There are many different home loans available to choose from. This article will discuss some of the loans that are available, in addition to some of their characteristics.
Mortgage with a Fixed Rate
The most popular and known type of mortgage is the fixed rate mortgage. The reason that so many people like this type of loan is because it is so stable. Your monthly payments will not adjust during the mortgage unless you personally modify the loan. A fixed rate mortgage has a rate of interest that cannot be modified over the course of the loan. The rate at the time of origination is the same rate of interest that will remain for the duration of the loan.
A majority of people will select a 30 year mortgage. However, there are some people who want to pay their mortgage for only fifteen years. So you have the chance to apply for either a 15 or 30 year mortgage with a loan that has a fixed rate. This is one of the main reasons that these types of mortgages are very well liked. This is not that difficult to budget through the years. The monthly payment is always known. If the interest rate goes up or down, you will not have to worry about it changing your monthly payments.
FHA Mortgages
The purpose of FHA loans is to supply aid to first time home buyers or those who do not have the money for a new home investment. Not only are first time home buyers usually approved for these loans, but they only have to come up with a three percent down payment. This is due to the fact that the Federal Housing Administration backs these home mortgages. All in all, a FHA loan is much easier to obtain than a traditional fixed rate mortgage.
Veterans Administration Loan
The Federal Housing Administration backs another kind of loan that is also given out by the Federal Housing Administration. There are only two types of applicants who will qualify for this loan. The first one is someone who has served in the military. The second is someone who is a surviving spouse of an active military member. A lot of times a veteran can get a Veteran's Administration home loan without putting any money down.
Conventional ARM
An ARM does not give a home buyer the same kind of stability that a FRM does. The rate of interest for an ARM adjusts itself according to whatever the prevailing market rate may be. Basically, your monthly payment will be impacted by the current interest rate. Some adjustable rate mortgages have a cap on the number of interest adjustments that are allowed.
Keep in mind that your monthly payment consists of principle and interest. Although the principle will stay the same each month, the interest portion will adjust according to the market rate. This is one of the things that people like the least about ARMs, but it is still one good method to get more house for the money that you pay. This is one of the most important reasons that adjustable rate mortgages in the beginning can be so sought after. A regular balloon mortgage will have standard monthly payments. However, the duration of the loan is usually for no more than five or seven years. The loan has reasonable payments at the start of the loan. But, it is the final payment that has a huge balloon payment. The homeowner has to pay this bit amount at one time or make arrangements to get another loan with better financing.
Interest Only Loans
With an interest only loan, you will have to pay only the interest on the loan for a certain amount of years. Then you will be required to pay scheduled amounts for both the principle and interest. It is the loan changes that make both balloon and ARM loans difficult to handle in the very end.
Finally, these are some of the kinds of mortgages that people can choose to get. Some will be harder to get than others. But they are there to help you achieve your dream of purchasing a new home.
Mortgage with a Fixed Rate
The most popular and known type of mortgage is the fixed rate mortgage. The reason that so many people like this type of loan is because it is so stable. Your monthly payments will not adjust during the mortgage unless you personally modify the loan. A fixed rate mortgage has a rate of interest that cannot be modified over the course of the loan. The rate at the time of origination is the same rate of interest that will remain for the duration of the loan.
A majority of people will select a 30 year mortgage. However, there are some people who want to pay their mortgage for only fifteen years. So you have the chance to apply for either a 15 or 30 year mortgage with a loan that has a fixed rate. This is one of the main reasons that these types of mortgages are very well liked. This is not that difficult to budget through the years. The monthly payment is always known. If the interest rate goes up or down, you will not have to worry about it changing your monthly payments.
FHA Mortgages
The purpose of FHA loans is to supply aid to first time home buyers or those who do not have the money for a new home investment. Not only are first time home buyers usually approved for these loans, but they only have to come up with a three percent down payment. This is due to the fact that the Federal Housing Administration backs these home mortgages. All in all, a FHA loan is much easier to obtain than a traditional fixed rate mortgage.
Veterans Administration Loan
The Federal Housing Administration backs another kind of loan that is also given out by the Federal Housing Administration. There are only two types of applicants who will qualify for this loan. The first one is someone who has served in the military. The second is someone who is a surviving spouse of an active military member. A lot of times a veteran can get a Veteran's Administration home loan without putting any money down.
Conventional ARM
An ARM does not give a home buyer the same kind of stability that a FRM does. The rate of interest for an ARM adjusts itself according to whatever the prevailing market rate may be. Basically, your monthly payment will be impacted by the current interest rate. Some adjustable rate mortgages have a cap on the number of interest adjustments that are allowed.
Keep in mind that your monthly payment consists of principle and interest. Although the principle will stay the same each month, the interest portion will adjust according to the market rate. This is one of the things that people like the least about ARMs, but it is still one good method to get more house for the money that you pay. This is one of the most important reasons that adjustable rate mortgages in the beginning can be so sought after. A regular balloon mortgage will have standard monthly payments. However, the duration of the loan is usually for no more than five or seven years. The loan has reasonable payments at the start of the loan. But, it is the final payment that has a huge balloon payment. The homeowner has to pay this bit amount at one time or make arrangements to get another loan with better financing.
Interest Only Loans
With an interest only loan, you will have to pay only the interest on the loan for a certain amount of years. Then you will be required to pay scheduled amounts for both the principle and interest. It is the loan changes that make both balloon and ARM loans difficult to handle in the very end.
Finally, these are some of the kinds of mortgages that people can choose to get. Some will be harder to get than others. But they are there to help you achieve your dream of purchasing a new home.
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Before you think about applying for a home loan you should research as much as possible and Home Finance Assistance is the first place you should start.
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