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Various Kinds of Home Loans
Owning a house is a long awaited goal of most adults. It is a goal that plenty of Americans try to accomplish everyday. You may also have a desire to own your own home. However, if you are like most people, you probably do not have enough cash on hand to pay for a home. Normally, a person has to get loan approval to make this type of purchase. As a result, there are numerous home loans to get in this situation. The following article is going to list a few of these types of loans, along with a few of their features.
Fixed Rate Loan
The loan that most people are familiar with is the fixed rate mortgage. The reason that so many people like this type of loan is because it is so stable. The monthly amount will not adjust unless you authorize adjustments to the loan. With a fixed mortgage, you have the same rate of interest over the life of the loan. The origination rate is the same interest rate that the loan will maintain over the loan duration.
The most requested loan duration is 30 years for the average homeowner. But, there are those who want a loan for 15 years too. So you have the option to apply for either a 15 or 30 year mortgage with a loan that has a fixed rate. This is why a lot of people want to get fixed rate mortgages. This makes things much easier to plan for financially for over the course of the loan. You always know how much is required each month. There is no reason to worry about fluctuations in the market.
Dont forget about a reverse mortgage if you are in the market to get a loan on your home. These loans offer no monthly payments. This allows you to put that money towards luxuries like food and heat, maybe even medications.
The goal of FHA loans is to provide assistance to new time home buyers or those who cannot afford a new home purchase. Not only are first time home buyers usually approved for these loans, but they only have to come up with a three percent down payment. This is because these loans are backed by the FHA. Basically, it is much simpler to get a mortgage that is guaranteed by the government than other types of home mortgages.
The Federal Housing Administration backs another kind of loan that is also given out by the Federal Housing Administration. Simply put, two kinds of home buyers will get this mortgage. The first one is someone who has served in the military. Second, the other kind of home buyer has to be a widow or widower of an active military member. A lot of times a veteran can get a VA home loan without putting any money down.
Traditional Adjustable Rate Mortgage
Unlike fixed rate mortgages, adjustable rate mortgages are not that stable. The interest rate on ARMs will change according to the current market rates. Simply put, your monthly payment will adjust according to whatever the current rate might be. Some adjustable rate mortgages have a cap on the amount of interest adjustments that are allowed.
Keep in mind that your monthly payment consists of principle and interest. The principle does not adjust, but the interest changes based upon the current market rate. This might be one of the disadvantages of getting an ARM, but it is also the easiest way to get more house for your money. This is one of the key reasons that adjustable rate mortgages at the very start can be so desirable A regular balloon mortgage will have standard monthly payments. But, the loan is only for about five or seven years, which is extremely short term. The loan payments at the start of the loan are simple to handle. But, the last payment is the one that blows up into an onetime large payment. The homeowner can decide to obtain a new loan or make this big payment.
Interest Only Loans
Interest only loans mean that you only have to pay the monthly interest on the loan. Then after a certain time, you will pay all of the loan, which includes the interest as well as the principle. Just like with balloon mortgages, this type of loan seems perfectly fine until the end of the loan.
In conclusion, these are some of the home loans that are available. Some will be harder to get than others. But, they are there to help you get a new home.
For years, I have been teaching baby boomers about the advantages, in addition to the disadvantages of reverse mortgages . When carefully informed, the property owner can come up with a decision which they understand.