Types of Mortgages
When a buyer is considering a loan, it is imperative to investigate the different types of mortgages. The selection decision can be made to find out which suits the buyer’s needs best. There are popular types of mortgage loans and specialty loans to fit a select group. Here is the list of mortgage types. Verify all information and fine print with a professional. The lender will verify your information and see if you qualify for each type of loan.
Fixed Rate Mortgages
- This is an amortized loan with a fixed rate for a fixed number of years.
- These are insured by the government through mortgage insurance. First time home buyers should take advantages of these loans because of low down payments.
- These loans are available to veterans who have served in the U.S. armed forces and in some cases, the spouses. The best benefit of this loan is that no down payment is needed. The Department of Veteran Affairs guarantees this loan.
- These loans are really not interest only; they have an option included to make interest-only payments for a certain amount of time.
Option ARM mortgages
- These are adjustable rate mortgages with interest rate fluctuations. There are a variety of index rates and options.
Combo Piggyback Mortgages
- This is a combination of two loans, a first and second mortgage. These can be fixed or adjustable rates. This is used with a low down payment to avoid private mortgage insurance.
Adjustable Rate mortgages
- An ARM mortgage is one where the interest rate adjusts within a certain period of time.
- This loan is for borrowers who want a low interest rate initially. The reduced interest rate ensues because there are paid fees to lower the interest rate.
- These loans are provided when a seller wants to borrow equity in one home to purchase another. The first home is used as collateral or a bridge loan. This is also referred to as a swing loan.
- This is a FHA loan program that funds the repairs for a home and rolls the repair fund into one loan.
- Borrowers take out loans on the equity of their home for cash. These can set up as a line of credit, an adjustable or fixed loan.
- Borrowers who are 62 with enough home equity qualify for this mortgage. Instead of the borrower making payments to the lender, the lender makes payments to the borrower. The borrower must remain in the home.
Research the best mortgage for your situation. Be sure to ask your lender to identify the fine print and advantages and disadvantages for your situation.