Mortgage Types

During the early years, there were only three different mortgage types—the fixed rate conventional mortgage, the FHA loan, and the VA loan. However, over the years, there are now different mortgage types that are interesting but confusing at the same time.

Different Types Of Mortgage Loans

There are generally four mortgage loan types—the fixed rate mortgage types, the FHA loans, the VA loans, and the Interest-Only Mortgage Types. The fixed-rate mortgage types are the oldest forms wherein the interest rates are fixed in a specified time between ten to fifty years. Although this is the oldest types, a lot of people still consider to have this type since borrowers will no longer have to worry about unexpected increase of interest rates. However, these types of loans are typically expensive, thus making this preferred mostly by the rich ones. The FHA are the mortgage types that are government- insured through a mortgage insurance that is duly funded into a loan. The most ideal candidates for these types of loans are mostly the first-time homebuyers since the required down payments are just minimal and that FICO scores really do not matter at all.

Additionally, the VA loans are one of the government loan types that are available for US army veterans, or in some cases, to the spouses of those deceased veterans. The requirements generally vary from the number of years the veteran has served in the army, or whether he is discharged in an honorable or dishonorable manner. What is good about these types of loans is that borrowers are no longer required for any down payments. These types of loans are guaranteed by the Veterans Administration and funded by conventional lenders. Another types are the Interest-only mortgage types. These types of mortgage are quite misleading since these loans are really not interest only wherein the borrowers will only have to pay for the interest of the loans. These types of loans contain options for borrowers to make interest-only payments. These options are available only for certain periods of time. However, some of the junior mortgages are really interest only, requiring balloon payments that are normally consisted of the maturity and the balance from the original loan.

Hybrid Types Of Mortgage Loans

There are also other types of loans called the hybrid types. These types include the option ARM Mortgage Types, the Combo/ Piggyback Mortgage Loan Types, the adjustable rate mortgage types, and the mortgage buydowns. The Option ARM loans are quite complicated. They are somewhat similar with the adjustable-rate mortgage types that has interest rates the periodically fluctuates. As its name implies, the borrowers can choose his own payment options and his preferred index. However, borrowers should be aware of minimum payment options, since these can also result into negative amortizations. The
Combo/ Piggyback Mortgage loan types basically consist of two loans—the first mortgage and the second mortgage. The mortgages can also be both adjustable rate mortgages or a fixed-rate mortgage, or even a combination of both. Borrowers can take two loans if the down payment will not go above twenty percent of the actual value, so that they will not have to pay for a private mortgage insurance.

The adjustable-rate mortgages come in different colors, sizes, and flavors. Interest rates can periodically fluctuate. Rates can move monthly, or semi-annually, annually, or they can remain fixed for longer periods of time, but eventually adjusts. Mortgage buydowns are the mortgage types wherein interest rates are purposely reduce because the fees are generally paid at lower rates. Buyers, lenders, or sellers can actually buy down interest rates from the borrowers.

Now that you have learned about the different mortgage types, decide on which one is just right for you. Once you have decided, visit your preferred crediting institution or lender.