Different Types of Home Loans
Owning a home is a long awaited goal of a majority of people. It is a goal that plenty of Americans try to accomplish everyday. You may also have a desire to own your own home. However, just like others, you do not have the cash to buy a new home. Usually, most people have to take out loans for these types of purchases. Luckily, you have a lot of home loans to choose. The following article is going to list a few of these types of loans, along with a few of their features.
Fixed Rate Loan
The loan that most people are familiar with is the fixed rate mortgage. The reason that so many people like this type of loan is because it is so stable. The amount of money that you pay each month will not change unless you authorize modifications to the loan. A fixed rate mortgage has a rate of interest that is locked in 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.
The preferred loan duration is 30 years for the average homeowner. But, there are some home buyers who want a loan for 15 years too. So, if you take a loan with a fixed rate mortgage, you will have the same monthly payment for 15 or 30 years. This is why a lot of people want to get fixed rate mortgages. You can easily budget your money for years to come. You always know how much is due each month. If the interest rate changes, you won’t have to stress out about it increasing your monthly payments.
FHA Mortgages
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. Not only do first time home buyers generally get approval for these mortgages, but many times they only have to have a down payment of three percent. 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.
VA Mortgage
A VA loan is another type of fixed rate mortgage loan that is backed by the Federal Housing Administration. Simply put, two kinds of home buyers will receive this loan. The first one is someone who has served in the military. The next kind is a home buyer who has to be a surviving spouse of a person who was in the military. Plenty of times a veteran can get a VA home loan without putting any money down.
Conventional ARM
An ARM does not give a home buyer the same amount of stability that a FRM provides. The interest rate on ARMs will change according to the current market rates. As a result, your monthly payment will always change based upon whatever the current market rate may be. Some adjustable rate loans have a cap on the number of interest changes that are allowed.
Remember that your monthly payment is both the principle and interest. The principle does not adjust, but the interest adjusted based upon the current market rate. Even though most people do not like this specific feature when it comes to ARMS, but this kind of loan is still a good way to get more value or home for the money that you are paying. This is one of the key reasons that adjustable rate mortgages are so popular. However, the duration of the loan is usually for no more than five or seven years. The loan payments at the beginning of the loan are simple to manage. But, the last payment is the one that balloons into a onetime large payment. The homeowner has to pay this large amount at one time or make arrangements to get another loan with better financing.
Interest Only Loans
The loan requirements of an interest only loan say that you only are required to make payments on the interest of the loan. After that specified amount of time, you will be responsible for paying the full monthly payments. 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 getting a new home.
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