Looking for a mortgage? There are many different types of loans you can get for your new home, but which is the best for you? What do all of the loan types mean for you in the long term?
Conventional mortgage – Conventional mortgage are based on market rates at the time of purchase and are usually for about 30 years on a typical home. These market rates are determined mostly by ten-year bond rates, since the typical 30 year loan will be refinanced every ten years or so. Almost anyone with decent credit can get a conventional home mortgage loan for about 30 years with about 10-20{ecd1c82889c5dde6baa4cae2f6d3d4c330bac74c2b880dafaca78809ece33a56} down, depending on credit score, history, and debt-to-income ratios.
FHA Loans – A FHA loan is a loan available to anyone with a decent debt-to-income ratio, and are all covered by the FHA. If you default on a FHA loan, the FHA will pay the loan for you using an insurance premium they charge you and all the other people taking out FHA loans. This security allows homeowners to borrow larger amounts of money then they would on their own with a smaller down payment (more like 3{ecd1c82889c5dde6baa4cae2f6d3d4c330bac74c2b880dafaca78809ece33a56} instead of the standard 10-20{ecd1c82889c5dde6baa4cae2f6d3d4c330bac74c2b880dafaca78809ece33a56}). These loans are not for everyone; the monthly insurance premium may not factor into your budget.
VA Loans – VA Loans are only for veterans of the United States military and offer conventional loans at lower rates or no money down. These loans are part of the United States’ military benefits program.
Jumbo Loans – Jumbo loans are currently any loans over $350,000. The amount changes as the market changes. Jumbo loans also have special rates
Adjustable Rate Mortgages – An adjustable rate mortgage, or ARM is a loan where the rate can change depending on market conditions. ARMs can greatly change your monthly payment, up or down. You could be fine one month, then strapped for cash the next month.
No Closing Cost Loans – No closing cost loans sound like a great deal; no closing fees, paperwork fees, credit check fees… But just know that you are not getting any of this for free. The interest rate and cost per month will be higher with a no closing cost loan.
Interest Only Mortgage – An interest only loan is a loan where, for a short period of time, the loaned only pays the interest on the loan. The principal remains the same, and the loan does not begin to be paid for about a year. This helps people with changing needs help get the home of their dreams without running into financial troubles.
Bridge mortgage – Bridge mortgage are loans that help the homeowner to “bridge the gap” between the cost of the home they are purchasing and what the total of their loan is. A bridge loan helps those who need to relocate, and have to purchase a home before they have sold their last home. Bridge loans are attached to your first home, the one you are trying to sell, so that you can move and use your old home as collateral to get a loan on your current home.
There are many more types of mortgages, but these are the ones you will see most often.. Always check with a financial advisor before deciding which mortgage is for you.
