When it comes to home mortgages, there is no such thing as "one size fits all." Homebuyers come to the financing table with all manner of different circumstances dictating the type of mortgage they will need. Fortunately, there are many different types of mortgages available these days, and that means that chances are, if you are in good financial standing, you’ll be able to find a mortgage that is the right fit for you.
Here is a brief overview of the types of mortgages available today:
- Adjustable-rate mortgages, or ARMs, feature a changing interest rate, which will affect the size of your monthly payments as the rate increases or decreases, depending on market conditions. Often, these rates adjust upward, meaning increasing monthly payments. While they may offer an attractive rate at the outset, it’s important to be aware that you will need to plan for potential rate increases.
- Fixed-rate mortgages feature an interest rate that is locked in at the time that the mortgage is obtained. With a fixed interest rate, the borrower can be assured that monthly payments will be stable for the life of the loan.
- Conventional mortgages are not guaranteed by the government. They are private loans that do not rely on any government backing.
- Government loans, such as the FHA loan and VA loanare guaranteed by government-sponsored insurance. An FHA (Federal Housing Administration) loan is secured through a private lender, but insured by the FHA so that if a borrower defaults, the lender will still see repayment from the government. A VA loan (which is managed by the Department of Veteran Affairs) is available to members of the military service and their families. An advantage of FHA and VA loans is that they usually require less or no money down.
- Jumbo loans are loans that are valued at an amount higher than the standard conforming loan limits set by Fannie Mae and Freddie Mac. These loans, due to their higher risk, usually carry a higher interest rate than loans that conform to standard limits. They are generally used to purchase luxury properties.
There are other specialty loans available to certain types of home buyers. Depending on your situation, you may wish to look into a construction loan, a bridge loan, or a reverse mortgage. Your mortgage specialist will have information on specialty loans that he or she can share with you.
How do you determine which type of mortgage makes sense for you? You need to consider factors such as how much money you have available for a down payment, your credit standing, and whether your personal circumstances will allow you to qualify for any type of specialty loan, just to list a few factors.
Whatever loan you apply for, it is a good idea to get pre-approved (and not simply pre-qualified) by your lender in order to have a sense of likely financial backing when you make an offer on a new home. If you have questions about your eligibility for certain types of loans, an established mortgage broker can help point you in the right direction to obtain the home mortgage that is right for you.
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Article Source: RealtyTimes.com/Chip Poli