When applying for home mortgage,it crucial to understand the different loan package to enable you make the right decision since various mortgage loans exist for borrowers’ needs
With so many different mortgages available, choosing one may seem overwhelming but you must better select a mortgage that’s right for your financial situation.Different mortgages have different requirements, advantages and disadvantages that must be weighed by borrowers before they take mortgage deal agreement.
Here are some of different types of home mortgage loans, which will help you select the one that fits your unique financial situation.
1. FHA (Federal Housing Administration loan
This government-insured loans that could be a good fit for home buyers with limited income and funds for a down payment and lower credit score when compared to conventional loans.,The loan are insured by the FHA
If your credit score falls between 500 and 579, you can still get an FHA loan as long as you can make a 10% down payment.Borrowers that qualify for an FHA loan are also required to purchase mortgage insurance, and premium payments are made to FHA.
Your lender bears less risk because the FHA will pay a claim to the lender if you default on the loan.
2. VA Mortgage loan
This can mortgage loan is insured by the Department of Veterans Affairs.To qualify for a VA loan, you must be a current or former member of the U.S. armed forces or the current or surviving spouse of one. If you meet these requirements, a VA loan could help you get a mortgage.
It doesn’t require mortgage insurance and No down payment requirement. VA loans allow borrowers to receive 100 percent financing for the purchase of a home.
3. United States Department of Agriculture (USDA)
The loan program for rural borrowers with low to moderate incomes. USDA loans are specifically available to “rural residents who have a steady, low or modest income, and yet are unable to obtain adequate housing through conventional financing.”
4. Home Equity Loans
This second mortgage, home equity loans which allow borrower take out a secondary loan based upon the equity they’ve built up. Home equity loans tend to have a larger interest rate, although the smaller sums involved open the door to shorter-term agreements. It runs alongside the standard home loan agreement
5. Fixed-rate mortgages
Borrowers mortgage interest rate and total monthly payment of principal and interest – will remain the same throughout the duration of the loan. Most fixed-rate mortgages feature 15-year or 30-year loan terms, though there are other lengths available.
6. Adjustable-rate Mortgage (ARM)
This home loan come with an initial rate that’s fixed for a specified period and then adjusts periodically. It’s generally recommended to borrowers who can afford to pay off their loan relatively quickly also believe interest rates will be lower in the future.
ARM has a lower initial rate that remains fixed for the first five years of the loan, and then adjusts to a new rate every year for each remaining year.