Banks Offer Many Different Mortgages To Borrowers
A mortgage is the most important loans a person will sign; it fulfills one of the most fundamental needs for a person, a home. It is also the most long term loans a person can sign, in most cases a thirty year commitment. There are a wide variety of mortgages available to meet the financial needs of the borrower. It is important to examine them all before signing a mortgage agreement.
A standard mortgage makes up approximately 70% of loans made each year. The standard fixed rate mortgage is enticing for most borrowers because their payments are stable throughout the life of the loan. These loans are usually for a term of 15 or 30 years, more commonly 30 years. Buyers can choose to escrow their taxes into the mortgage payments or pay the taxes out of pocket each year.
Government guaranteed loans come in three types; FHA, VA and USDA loans. FHA (federal housing administration)loans are set up to assist first time homeowners with lower incomes. Because these loans are guaranteed by the government they are easier to qualify for than a standard mortgage is. These homes also allow for a lower down payment then a traditional mortgage. There is one strict rule for an FHA loan, the home must be owner occupied.
VA loans are another type of government guaranteed loan, to apply for this loan one of the applicants has to have served time in the military. These loans are available with an extremely low down payment or no down payment at all. The applicant does have to show an ability to pay the loan and does not automatically qualify.
The final type of government guaranteed housing is the USDA Rural Development Guaranteed Housing Loan. These loans are available to those with low to moderate income that are purchasing homes in an area determined to be to be eligible. No down payment is needed for the loan and it is extremely easy to qualify for. This loan also accepts less than perfect credit.
If a government loan is not right for you there are several other option to meet your financing needs. Optional ARMs, also refereed to as flexible payment ARMs, have a rate that adjusts every month with no increase caps. Th benefit of this loan is very low initial payments. However borrows must be aware that the payments can become very high quickly.
Balloon mortgages are set up with regular payments like a standard mortgage, but only span a time of five to seven years. At the end of this term borrowers have to pay off the balance of the loan or seek refinancing. Until the final payment the rate is fixed.
The final loan we will discuss is the interest only loan. During a set period of time borrowers pay only the interest of the loan and no principle. The advantage is low mortgage payments initially, however once the term is over the payments jump dramatically as the principle is added on. The longer the interest only period, the larger the principle payments will be.
Mortgages come in many different forms, it is important that borrowers examine all their options and determine which is right for them. Be sure to look at both short term and long term effects the loan will have on your incomes before signing. Happy house hunting!
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