Those interested in purchasing a business or home will need to understand the various types of mortgage loans to ensure they apply for the best loan for their particular circumstance. Knowing which mortgage type is best for your situation will help ensure your mortgage application process is without unnecessary hindrances. Two of the most popular types of mortgage loans include fixed rate and adjustable rate mortgages. Other popular types include FHA loans, VA loans, Interest Only, combination and hybrid loans and piggyback. There are also specialty types including reverse mortgages, streamlined-K, bridge and swing loans and equity mortgage.
Federal Housing Administration (FHA) loans are provided through the U.S. Department of Housing and Urban Development (HUD). These loans are in high demand as they have low down payments and generally have an easier application process. Because these loans are insured by the government those who have a lower credit score or poor credit history yet can show they can handle a mortgage often prefer these types of mortgage loans.
Fixed rate mortgage loans are those where the interest rate, as well as your monthly mortgage payment remains fixed throughout the term of your loan. Those who wish to have a shorter term period may find that a lower interest rate is a good choice. Fixed rate mortgages can be selected in terms ranging from 10 to 40 years. Those who choose longer terms find that a fixed rate mortgage between fifteen and thirty years provides a smaller interest rate.
Those who have served in the military may find that a VA loan is a great option. Like government backed FHA loans, the United States Department of Veterans Affairs backs VA loans. These allow those who’ve served honorably in the military (and some civilian workers) to obtain loans usually without putting any down payment on the home. Those who’ve served in the military and for some spouses of deceased veterans, the VA loan is an excellent way to secure the financing needed to purchase a home.
Unlike fixed rate mortgages, adjustable rate mortgages are another popular choice. With these types of mortgage loans, the interest rates varies over the terms of the loan. As the interest rate on the mortgage changes, so too does the monthly mortgage payment. With an adjustable rate mortgage, payments may become lower or greater depending upon myriad factors. In addition to fixed rate and adjustable rate mortgages, there are also combination or piggyback mortgage loans that consist of using two types of mortgage financing with one loan. With this type of loan you could have two fixed rate mortgages, two adjustable rate mortgages or a combination of a fixed rate and adjustable rate mortgage.
In addition to the government backed FHA and VA loans there are also Rural Housing Service or RHS loans. These loans are provided through the United States Department of Agriculture and requires no down payment. RHS loans are also known for low closing costs.
Those looking for other types of mortgage loans may want to check with their local and state housing programs. These programs often help those with lower incomes obtain the financing needed to become homeowners. As these programs are designed to help those who’ve with lower income enjoy the privilege of home ownership, they often come with lenient qualifications and may be more favorable to those who’ve had poor credit history. If you are having difficulty obtaining financing for a mortgage, consider contacting your local housing authority and explaining your situation. Not only will they be able to point you in the right direction and let you know what types of mortgage loans may be best for your situation, but they also have many free workshops available for those considering buying a home.