People who are applying for mortgages often start feeling overwhelmed before they even talk to a lender. That’s because there are so many different types to consider. Before making a final decision about a mortgage loan program, read about some of the characteristics of some common kinds.
Fixed Rate Mortgages
These are very popular because the interest rate stays the same through the entire length of the loan, which is usually thirty, fifteen, or ten years in duration. Because there is no fluctuation, homeowners should find it much easier to plan a budget.
However, be aware that the interest rates are generally higher for these types of loans than others, so monthly payments are as well. If you accept this type of mortgage loan program and decide it’s time to refinance to take advantage of lower interest rates, you must pay the closing costs in full first.
FHA Loans
The United States government has several financing assistance programs that have helped people become homeowners since 1934. The Federal Housing Administration (FHA) insures each mortgage loan program so lenders are able to offer better deals to customers.
Some federal programs are specifically designed for first-time buyers, people who purchase a fixer upper, senior citizens, and even people who work in particular industries, such as law enforcement and education. It’s worthwhile to see if one of these federally-backed programs could help you own a home.
Two-Step Mortgages
This mortgage loan program falls into the category of adjustable rate mortgages. It has a static interest rate for a particular period, and then changes into a rate that’s dictated by current market conditions. Although there’s risk involved in this option, borrowers might be given the choice to take a variable or fixed interest rate on a designated adjustment date.
Choosing between loans isn’t easy, because your decision could make an impact that lasts for years. The types of mortgages listed above aren’t the only solutions that exist, but you’ll likely encounter them at some point during your research process. Use the information above to feel more informed as you begin applying and getting in touch with a lender.
