Buying your dream home is very exciting but somehow it is hard as well. Correct financing is the most difficult task. Some of us don’t figure out the best loan type for the home. For this do proper homework on these terms. Once you know the trick of figuring out well then you do not need to worry! In this article, you will get an idea about different types of mortgage loans that give favours to many buyers and refinancers. Some of the main types of mortgage loans are as follows.
Firstly, let’s start with the basic ones.
Basic types of mortgage loans
There are three basic type of mortgage loans:
Fixed or Conventional Rate Mortgage
If you want to buy a house and want to do payments over a longer span then this type of loan is best for you. The fixed loan is consistent and the monthly payment instalments remain the same as the first one over the whole loan span. These types of loan have fixed rates and the federal government does not secure them properly. Some of the private finance companies are responsible for these types of loans. Fixed or conventional loans can be given on long terms of different years like 10, 20, 30, 40, 50. The most common are 10 and 30 years.
This type of loan can give you an open option to pay only the interest rate portion for 5 or 10 years. You do not need to pay the full payment during this period. If you pay interest rate first then this will slow down the repayment process over your mortgage loan but you do not need to worry about all this because it is somehow useful for you a little bit. If you have paid the interest rate for 5 or 10 years initially then after that you can pay the rest full mortgage as a fixed mortgage. This type of loan is good for those people that already know that they can easily sell or refinance the property. The interest-only loan is also good for those type of people that can easily afford the high monthly payment.
This type of loan consists of serval types but the most common one is 5/1 loan. In this type if you borrow a loan for 30 years then for the first 5 years you have to pay the same interest rate on the mortgage after that the rate can be changed for another 25 years. Adjustable loan interest rates depends upon the change in the economy. If the economy gets a minor change then it automatically reflects the interest rate and changes the cost of money that you borrow as a mortgage. So the fluctuation in the market causes an effect on the adjustable-rate mortgage.
Exotic Types of Mortgage Loans
The Exotic Types mortgage loans are of mainly three types:
If you take this type of loan then you have to prepare yourself first because this type of loan depends upon the large amount of payment that you have to pay at the end. The interest on the loan is only for a short and certain period. Sometimes it happens in so much hurry that the amount is unmanageable.
This loan is taken for the construction of home sometimes. A buyer has to pay a downpayment of less than 20% on the mortgage. To avoid any of the private insurance on mortgage some wise buyers take two different loans at the same time in combination. Due to this, they do not need to pay insurance amount on the mortgage.
If you want to buy a home in an expensive area then you need this loan. You have to pay a downpayment of approximately 10 to 20% on the recommended mortgage. A Federal government is not responsible for this type of loan because this loan can easily exceed the limits that are set by the government. The competition of interest rates is very high.
Special Assistance types of mortgage loans
They are of two types:
FHA Mortgage Loans
They are the loans that are given by the federal housing administration. The federal housing administration gives the guarantee of this loan. This type of loan can be given to a certain group of people. You do not need to worry about repaying of loan because they have built-in insurance on the mortgage. The down payments are also very less on these types of mortgage loans and overall cost also increases a little bit.
VA Mortgage Loans
These types of loans are given by the Department of veteran affairs. If a veteran from an armed force wants to buy a home then this loan is given to them. No downpayment applies to this type of mortgage loan. These types of low have a low-interest rate and give flexibility to the borrowers.
Research is the basic key to reach your goal. Do proper research on the types of loans and do consider which type of loan you need? Review all your financial conditions and requirements then move forward to fulfil your goal.
If you face any difficulty and need guidance, contact Aceland Mortgage.