Choosing the mortgage that is right for you is essential when one is involved in the process of home purchasing. Thus it is important that all options are understood.
Basically, the two things one should consider when considering a home loan is what type meets best your home purchasing needs as well as which loan offers the most ideal schedule for repayment.
The fixed mortgage rate loan types
Fixed rate home mortgage loans have an interest rate that basically remain the same for the whole life of the loan.
These payments have predictable monthly fees yet you are immune to any rising interest rates. Therefore, your interest and principal payments will not increase.
The adjustable home mortgage rate
Mortgages that are adjustable in rate have rates of interest that adjust in a periodic manner as based on the exiting conditions of the market.
The rate is initially fixed during the period of its introduction (anywhere between one year to a decade) and is usually lower compared to a mortgage that has its rate fixed.
After this period, the rate then adjusts every year or about semi-annually as based on the index of the market, however it cannot go beyond the pre-determined cap adjustment.
Jumbo home mortgage loans
The amount given out on this type of loan exceeds the amount established by corporations. Since jumbo home mortgage loans are sold and bought on a scale that is smaller, they have rates that are a little high compared to other type of home loans.
B/C home mortgage loans
These types of loans are given to those borrowers that have filed recently for foreclosure or bankruptcy or those who have late payments on their reports of credit.
The purpose of B/C home mortgage loans is the offer of temporarily financing to applicants until they could qualify for type A conforming financing.
Government home mortgage loan programs
One type of government loan programs is VA loans. These types of loans are definitely guaranteed by the US Department of Veterans Affairs.
This allows service persons or veterans to acquire home mortgage loans with terms that are favorable (usually in the absence of a down payment).
RHS home mortgage loan programs
RHS means Rural Housing Service if the USDA or the US Department of Agriculture. This type of loan guarantees residents in the rural area with very minimum costs for closing. Down payments are also unnecessary.
All in all, there are a lot of home mortgage loan programs available. It all depends on your needs, wants and means.
Showing posts with label home mortgage type. Show all posts
Showing posts with label home mortgage type. Show all posts
Thursday, 31 July 2008
Saturday, 26 July 2008
Financing Choices for Home Mortgage
There are several ways to finance your home. In order to choose the most appropriate home mortgage for your personality and lifestyle, assess the different type of financing for home mortgage:
1) Fixed-rate mortgage
Fixed-rate mortgage are those with interest rates that remain the same until the life of the loan ends. For consumers who are looking for a stable rate that will not experience interest rate fluctuations, this home mortgage financing is a great deal.
A favorite among first time homebuyers and retirees, it can help in organizing and budgeting finances while protecting consumers from increase of interest rates. This kind of financing for home mortgage is best for consumers who plan to stay in their homes for more than 5 to 7 years.
2) Adjustable-rate mortgage (ARM)
Adjustable-rate mortgage, or simply ARM, is a kind of financing for home mortgage wherein the borrower and lender agrees on a certain interest rate that will periodically change. Interest rates will rise or fall, usually with regards to a specific index.
The advantage of an ARM is that the initial interest rate is usually lower than a fixed-rate mortgage. When the interest rate goes down, so will your payments. If you’re planning to keep a home for a short period, this mortgage financing is suitable for you.
3) Balloon Mortgage
A balloon mortgage is a loan that is amortized over longer period compared to the loan term. A balloon mortgage usually has a 15-year term, which is amortized over 30 years to make monthly payments controllable. When the 15-year term ends, you must repay the full principal due of the loan in one large sum, called the “balloon payment”.
When you plan to keep your home for a short time, this may be a practical financing plan. However, make sure to ask when the term ends to prevent possible financial problems.
4) Government loans
Through government lenders such as the Veterans Administration (VA) and the Federal Housing Administration (FHA), government loans often allows consumers with a lower down payment compared to traditional bank loans.
VA loans are perfect for veterans. Government loans are also suitable for consumers buying lower-priced homes with smaller down payments.
5) Convertible ARM (Adjustable-rate mortgage)
Convertible ARM usually starts out as an ordinary ARM, and then gives you an option to lock a fixed rate without refinancing. However, this option will only be offered after a specified time.
Knowing your financing options for home mortgage can save you money by preventing high interest rates and unworkable payment plans. Make sure to ask questions to learn which financing plan best fits your needs.
1) Fixed-rate mortgage
Fixed-rate mortgage are those with interest rates that remain the same until the life of the loan ends. For consumers who are looking for a stable rate that will not experience interest rate fluctuations, this home mortgage financing is a great deal.
A favorite among first time homebuyers and retirees, it can help in organizing and budgeting finances while protecting consumers from increase of interest rates. This kind of financing for home mortgage is best for consumers who plan to stay in their homes for more than 5 to 7 years.
2) Adjustable-rate mortgage (ARM)
Adjustable-rate mortgage, or simply ARM, is a kind of financing for home mortgage wherein the borrower and lender agrees on a certain interest rate that will periodically change. Interest rates will rise or fall, usually with regards to a specific index.
The advantage of an ARM is that the initial interest rate is usually lower than a fixed-rate mortgage. When the interest rate goes down, so will your payments. If you’re planning to keep a home for a short period, this mortgage financing is suitable for you.
3) Balloon Mortgage
A balloon mortgage is a loan that is amortized over longer period compared to the loan term. A balloon mortgage usually has a 15-year term, which is amortized over 30 years to make monthly payments controllable. When the 15-year term ends, you must repay the full principal due of the loan in one large sum, called the “balloon payment”.
When you plan to keep your home for a short time, this may be a practical financing plan. However, make sure to ask when the term ends to prevent possible financial problems.
4) Government loans
Through government lenders such as the Veterans Administration (VA) and the Federal Housing Administration (FHA), government loans often allows consumers with a lower down payment compared to traditional bank loans.
VA loans are perfect for veterans. Government loans are also suitable for consumers buying lower-priced homes with smaller down payments.
5) Convertible ARM (Adjustable-rate mortgage)
Convertible ARM usually starts out as an ordinary ARM, and then gives you an option to lock a fixed rate without refinancing. However, this option will only be offered after a specified time.
Knowing your financing options for home mortgage can save you money by preventing high interest rates and unworkable payment plans. Make sure to ask questions to learn which financing plan best fits your needs.
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