Different Types of Mortgages Loans

 

When your mom was applying for a mortgage loan, the choices were pretty simple. They can apply for an FHA loan, conventional mortgage, and fixed rate. Nowadays, choosing the right one can be daunting. The overwhelming array of mortgages available in the market today will make it challenging for beginners to understand the entire process. This article will try to explain the popular and hybrid types of mortgages.

 

The Different Types of Mortgages Explained

 

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We tried to make it as simple as possible and explain only the popular choices of mortgage loans. Here are some options that are divided into a few categories.

 

The Popular Mortgage Loans

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·         Fixed-Rate-This type of loan has the same interest during the entire duration of the repayment term. Due to this, the borrower can guarantee that the amount of their monthly payment will be fixed. Even if you are applying for a long-term option, you can expect to pay the exact interest rate.

 

·         FHA- This type of mortgage loan is insured by our government. This is the perfect choice for first-time house buyers. It is also ideal for those who do not have a credit history since the agency will not require a FICO score, and it comes with a minimum amount of upfront payment required.

 

·         VA- This is another type of government loan that is exclusive only to veterans. In some cases, the spouse of the late veterans will also be approved. The requirements will vary, but commonly the agency will check the years of service in the US military and whether you were discharged honorably. VA does not require a down payment.

 

 

 

 

·         Interest-Only- The term 'interest-only' is misleading since the borrowers will not just settle the loan's interest. This loan is also accessible for a limited period. There are junior mortgages that are genuinely 'interest-only' that need balloon payment.

 

Hybrid Type

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·         Option ARM- This mortgage loan is a bit complex. The rates are adjustable, so the interest rate may fluctuate unpredictably. The borrower will be able to choose from an array of index rates and options. You should avoid minimum payment since it can lead to negative amortization.

 

·         Combo Type- This financing option is consists of 2 mortgage loans; the first and second mortgage. It can be fixed-rate or adjustable, or possibly a combination. Some borrowers prefer this to avoid private insurance.

 

·         Adjustable-rate- The adjustable-rate mortgage financing option is available in different sizes, terms, and options. The rate can also fluctuate periodically.

 

·         Buydowns- This is for borrowers who want to pay a decreased interest rate. Since the fees are used to settle, the interest rates are considerably low.

 

Finally, there are also specialized types of mortgage loans such as Streamlined-K, Bridge loans, Equity, and reverse mortgages. When choosing the best mortgage loan available, we encourage you to conduct in-depth research about the type of loan you prefer to guarantee that you make the best choice.

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