Choosing the right type of home mortgage loan is an important factor in the purchase of a home and with the correct choice of mortgage the home buying experience will be a positive one.
These are some of the more common mortgage loans available at this time to help guide you in the decision making process:
FHA Mortgage Loans
With government backing, families can buy a home at a lower initial cost. It is a good program for first time home buyers. A FHA mortgage allows some borrowers to qualify for the lower interest rates of a conventional loan. This can save thousands in interest charges.
The VA Home Loan Program for Military Veterans
The VA home loan can be used to purchase a new home or refinance an existing one and is available to all honorably discharged veterans and active duty military. The Department of Veterans Affairs (VA) does not actually lend out money but they guarantee or insure the funds that are loaned to you by a VA approved financial institution. You can go to any bank or mortgage company that participates in the VA loan program to apply.
The Fixed-Rate Mortgage
A fixed mortgage has many benefits and advantages over an adjustable rate loan. The rate you start with is the rate you end with, even if the term of the loan is for 15 or 30 years down the road. This is significant. Mortgage lenders evaluate borrowers on an individual basis, based on a variety of factors. These factors include the borrower’s credit score, income level, current level of debt, and the affordability of the home loan they’re trying to obtain.
The Adjustable-Rate Mortgage
This type of mortgage can be implemented successfully. It has acquired a bad reputation because it’s just frequently misused. Using an ARM loan under the right circumstances can save you money in interest. Using it in the wrong manner can lead to all sorts of financial problems, including foreclosure.
As its name suggests, the adjustable-rate mortgage loan (ARM) has an interest rate that adjusts on a predetermined basis. This can cause the monthly payments to go up or down, depending on the prevailing rate at the time of adjustment.
By Martin Fisher