Types of Mortgages

Explanation of mortgage types.....

There are many types of mortgage loans designed to meet the various needs of buyers. Below you will find information on some of the more popular types of mortgage loan programs:

FHA Loans:

A few years ago these loans were not very popular because of their strict qualification requirements. Today these are excellent loans for most anyone, but especially for those with little down payment funds and others who have some credit score problems.

FHA Mortgage Loans offer an excellent interest rate for the buyer.

The Federal Housing Administration (FHA) was established in 1934. The purpose was to help improve housing conditions and to provide an adequate home financing system through insured mortgages.

In the 1940’s FHA Home Loans helped to finance military housing as well as homes for returning military personnel and their families. And today the FHA mortgage loan is still a good choice.

Fixed Rate Mortgage:

Typically people go for the 30 year fixed rate mortgage. However, you can get a 10-year, 15-year, 20-year and even 40-year and 50-year terms. If you can afford the payment then the shorter the term the less interest you will pay over the term of the loan. Actually, the monthly payment on a 15 or 20 year fixed rate mortgage is not always that much more than the payments for a 30 year fixed rate mortgage. You should at least ask what each of the payments would be before you just accept the traditional 30 year mortgage.

If you need help finding a fixed rate mortgage contact a local mortgage broker or search online. You want to find the best fixed rate mortgage for you and your situation. Shop around and check for the best interest rate and the lowest closing cost fees.

Interest Only Mortgage:

Interest Only Mortgage Loans are somewhat of a misnomer. You do still have to pay back the principal of the loan. These loans which are traditionally termed an interest only mortgage loan means that you only make the interest payments for a period of time. This is usually for the first 5 years with a balloon note for the principal amount of the loan. This means that one would have to then obtain a new mortgage for the principal balance at the end of the five year period.

An example of where an interest only mortgage loan would be preferable is people who only live a few years in a city due to the nature of their work. These people would make just the interest payments on their mortgage knowing that they will sell their house before the balloon note comes due. They also hope that their home will appreciate in value and will sell for more than they paid for it and will still pocket a little profit.

Adjustable Rate Mortgage:

To explain an adjustable rate mortgage is not easy. They come in all types and flavors. Basically the rate on the loan starts out at a certain rate which can be fixed for six months, one year, two years, three years or five years. Whatever the rate period the rate will go up or down at the end of that period. For instance if you have an adjustable rate mortgage term of two years at the end of the two year period your rate will be adjusted based on the current rates available at that time.

Reverse Mortgage:

Reverse mortgages are available to anyone who has equity in their home and is over the age of 62. Instead of the owner of the home making a payment to the lender the reverse mortgage lender makes a payment to the borrower for as long as the borrower resides in the home. The interest rate on a reverse mortgage can be fixed or adjustable.

For additional reverse mortgage information visit http://www.reversemortgage.org. This site is provided by the National Reverse Mortgage Lenders Association (NRMLA) and provides very detailed information reverse mortgages.

VA Loan: