Make your home buying easier – Know your mortgage loans
The first consideration that you need to make when purchasing real estate is the kind of mortgage loan that you need to take out. Financing of your mortgage loans is a very important factor in deciding how easily you will be able to pay back your mortgage. Depending upon your financial condition and other obligations you can avail various types of mortgage loans to help you with paying back your mortgage easily. Read on to know your mortgage loans available.
Basic home mortgage categories
You can avail the basic home mortgage categories among which the traditional fixed rate mortgages or FRM are the most famous. Almost 70% home purchases are done through traditional mortgages.
- The most appealing characteristic of fixed rate mortgages is that they have tremendous stability. The interest rate on your mortgage is locked from the time of the origination of the mortgage and it remains stagnant throughout the term of the mortgage. Thus the amount of mortgage payment you have to make is fixed and as a result you can budget your other expenses accordingly without the fear of any fluctuation.
- The second type of basic home mortgage is the adjustable rate mortgage which has an interest rate that is tied to an index and changes according to changing market rates. Although you don’t get stability with this kind of a mortgage you may get really low rates at times which will reduce your mortgage payment for that time period considerably. Also the initial rate in ARM is lower than FRM.
Government guaranteed mortgage loans
You can get government guaranteed mortgage loans that are more easily available if you have a lower credit score or have difficulty in making down payments.
- Such a government guaranteed loan is a FHA loan given out by the Federal Housing Association. FHA loan are especially beneficial for you if you are a first time home buyer with a moderate or low income. Also you can make from 3% to 5% down payment to get this loan as opposed to 20% down payment in traditional mortgages. The interest rates are also lower as compared to traditional mortgages.
- Another type of government guaranteed mortgage is the VA loan. To be eligible for a VA loan, you need to have served in the military actively or you are the surviving spouse of an active service member. A veteran can often get a VA loan even without a down payment or very little of it.
- The third type of government guaranteed loan is a USDA loan. This is meant for low and moderate income individuals who are purchasing houses in areas that are designated for rural development. With a USDA loan you won’t require any down payment or mortgage insurance and the qualification criteria are quite relaxed.
Thus your home buying process will be easier as you learn and know your mortgage loans and the options available to you.