What are the 3 Types of Home Mortgages?
There are a variety of mortgages available, but some of the most common include:
1. Fixed Rate Mortgage - the interest rate is fixed for the life of the loan and won't change over time. This can be reassuring to homeowners that know what their monthly payment will be for each month throughout the course of their loan. The downside is that if interest rates go down during the years of their loan, they won't be able to take advantage of it.
2. Adjustable Rate Mortgage - there are 2 types of adjustable mortgages: one where the rate starts off low and then rises significantly after a few years (balloon) or one that fluctuates with market conditions (hybrid). They may start off a little bit cheaper than a fixed rate, but they will likely not stay that way. Visit this link: culpqc.com for more about the type of home mortgage.
3. FHA Mortgage - the Federal Housing Administration is a government agency that insures home loans for lenders who extend them to those with lower incomes or those who have less money for the down payment. FHA also has many types of loans available to borrowers, but they have a variety of down payment options and required expenses.More Types of Home Mortgages
4. VA Mortgage - some mortgages can be insured by the Department of Veterans Affairs, which is a government agency that provides financial support to U.S. military members and veterans. These loans are especially common for young service members who need or want to buy a home but don't have much savings for a down payment.
5. Conventional Mortgage - a home loan that isn't insured by any government agency and doesn't meet the requirements to be an FHA or VA loan. They can go to borrowers with higher incomes or larger down payments.
6. Jumbo Loans - typically, only those whose income and assets qualify them for mortgages in the range of $417,000 to $625,500 can apply for these loans. They are not insured by any government agency and they don't include discounts such as those for first-time home buyers and lower credit scores (A "jumbo" loan is a term used to describe a larger sized mortgage that exceeds the conforming loan size limit as set by Fannie Mae and Freddie Mac for that county).
7. Balloon or Bullet Mortgages - mortgages that require a much lower monthly payment than other types of loans but also have a much larger lump sum due at the end of its term (balloon) or one large, final payment (bullet). This is helpful if borrowers expect to sell the house or refinance by the end of the term, but it can be risky for those who might not have enough money saved up. You can discover more about the mortgage loan on this site.
8. Interest-Only Mortgage - these loans require that only the interest is paid each month; this allows borrowers to take advantage of low interest rates and make smaller monthly payments, but they will need to pay off the principal before term ends.
9. Convertible ARM - adjustable rate mortgages that have a fixed interest rate for an initial period of time (usually 5 or 10 years). The borrower can then choose to convert it into any other type, including a fixed rate mortgage with another special introductory promotion.
These are the options you can choose when you are up to apply for a home mortgage. Your choice depends on your choices and financial goals. The good thing is that you have enough time to think about it before applying for the mortgage. Don't let people tell you otherwise. You can get more enlightened on this topic by reading here: https://www.britannica.com/topic/mortgage.
