Differnet Home Loan / Mortgage Types

There are so many types of home loans (mortgages) out there that it can make your head spin just trying to find out all of the different kinds. When you are a first time home buyer it can be very overwhelming just trying to find out all of the types of Mortgages that are available to you and if you can even qualify for them. It also can be difficult to find all of the different types in one location. Below are some of the most common Home Loan (mortgage) types with a brief description.

Fixed Rate Mortgages:
This type of home loan is one of the most popular ones out there. The reason for its popularity is because the interest rate will be the same for the entire term of the mortgage. The most common length of these home loans are 15 year or 30 year. Lately more lenders have been open to 40 year terms. These are easy to budget for because you will know what your payment will be each month and it is usually the best defense against inflation.

Adjustable Rate Mortgages:
These are commonly referred to as the acronym ARM. These are basically the opposite of the fixed rate mortgages because the interest rate will change during the term of the home loan. The interest rate is usually based on an Index that can go up or down depending on the current economy. When the interest rate does change most of the time it will have a cap on it to prevent the interest rate changing to a payment that you can longer afford. An example of the cap would be the interest rate will change no more than 3 percent in any given year. These types of home loans are the most popular alternative to the fixed rate mortgages. There are more details that go into an ARM and we will make a separate article on all of the intricacies of the ARM type home loan.

Federal Housing Authority Home Loan:
These mortgages are referred to as their acronym as FHA. It is very rare that you hear them call it anything but, a FHA loan. This type of loan is not issued by the government it is issued by private lenders but, the government will insure this type of loan. The qualifying ratio is much lower than most loans because their purpose is to get people into homes that might not have been able to otherwise. Also, your down payment will be smaller or nonexistent compared to other conventional type home loans.

Department of Veterans Affair Home Loan:
This type of mortgage is very similar to a FHA home loan in the fact that it is once again insured by the government. The major difference between FHA and VA home loans are that VA loans are only available to veterans (people whom have served in the military), their spouses, and certain types of government employees.

Well, there is the list of the all of the major types of Home Loans (mortgages). As a first time home buyer we hope that you found this article helpful and will keep on your path of purchasing your first home. For others that have purchased homes before we hope that we may have helped demystify some of the home loan quagmires that we all have been in.

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