Types of Mortgages

A wide choice of home loans and financing options are available, including some that do not require a down payment.  Some choices are yours to make.  Others are based on your specific circumstances.  Talk to your lender about what works best for your financial situation.

  • Conventional: This mortgage is a contract between the lender and the borrower at the lender’s risk.  The borrower’s property is security (which means the lender can take your home for nonpayment of the mortgage).   This mortgage is not insured by any federally insured program.  However, it may be insured with a private mortgage insurance company.  Conventional mortgages usually require larger down payments than FHA or VA loans.
  • FHA (Federal Housing Administration): The FHA will insure the loan for the lender against loss in case the buyer cannot meet payments.  It requires the buyer to carry mortgage insurance through FHA.  FHA loans are available with as little as 3 percent down payment.
  • VA (Veterans Administration): This federal agency will guarantee the mortgages offered by private lenders to qualified members of the armed forces, active military personnel, veterans, or their widows.  In some cases one can buy a home on a VA loan with no down payment.
  • Jumbo: Some lenders will work out special terms for properties of very high value that fall outside typical lending standards.
  • Adjustable Rate Mortgage (ARM): The interest on an ARM may vary up or down at fixed intervals.  The changes are tied to a financial index such as on-year Treasury notes.  The ARM often offers a low beginning interest rate as a “teaser”.  However, this rate will go up after a certain time.  If interest rates are low, an ARM may be a good option.  This is especially true if its cap (the highest interest you may be charged) is not more than a few points higher than the current fixed rate.  ARMs are of special interest to buyers who know their income will rise in the future or who don’t plan to own the home for many years.
  • Balloon Mortgage: These mortgages are offered for short terms – usually 5 or 7 years.  Payments are based on what you would pay for a 30-year loan.  They have low monthly payments with a final, large payment due at the end of the term.   The low early payments may make it easier to get started in a new home, buy you must be sure that you will be able to make the final balloon payment.   At the end of their term, some balloon mortgages offer the option of extending the same mortgage for the remainder of the 30-year period.  Payments are based on rates at that time.
  • Fixed Rate Mortgage: The interest rate on this agreement stays the same for as long as you hold your mortgage, no matter how interest rates change in the financial markets.  With this type of mortgage, you know exactly how much you will pay in principal and interest on your home each month.  (Remember, taxes and insurance on your home may change from year to year.)

It’s important to keep in contact with your lender, so that if interest rates fall in the future  you can refinance your mortgage and save money.

 

Let’s us assist you with finding the mortgage that fits your specific needs.