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Types of Mortgage
Traditional Mortgage Loans
Fixed-Rate Mortgage Types
This is the most common type of home loan. These loans are applicable to 10-year, 15-year, 20-year-, 30-year, 40-year and even 50-year fixed-rate mortgage terms. This type of mortgage is all also completely amortized.
FHA Loans
A FHA mortgage loan is insured by the government by means of mortgage insurance which is funded into the loan. First-time home buyers are the most likely candidates for a FHA loan because the down payment requirements are minimal and FICO scores rarely matter.
VA Loans
This is another type of government loan and it is available to veterans who served in the U.S. Army. Sometimes, the loan even extends to the spouses of deceased U.S Army veterans. Although the primary requirement of this loan is to have served in the army, it depends on the years of service and whether the discharge was honorable or dishonorable. The main benefit to a VA loan is that the homeowner doesn’t need to scrimp up a down payment. Since the loan is guaranteed by the Department of Veteran Affairs, there is no cause to worry.
Interest-Only Mortgage Types
An interest-only mortgage does not thoroughly refer to “interest-only” payments. What this refers to is the introductory phase where a borrower will only be required to pay the interest. However, when the ‘promo’ period is up, the payments will significantly increase. Sometimes, the increase in payments succeeds those of a fixed-rate mortgage. On the other hand, there are certain junior mortgages where a borrower will be required to pay for the interest only and full payment for the amount borrowed will be paid upon the maturity date.
Hybrid Types of Mortgage Loans
Optional ARM Mortgage
Optional ARM loans are slightly complicated. They are adjustable-rate mortgages which mean that the interest rate may fluctuate periodically. Fluctuations in your ARM interest rate will mirror the fluctuations in the financial and real estate market. Just like the name implies, borrowers have a variety of payment options to choose from as well as index rates. But if you are considering this type of mortgage, e careful with the minimum payment option because this can often result in negative amortization.
Combo Mortgage Loan Types
Combo Mortgage loans consist of two mortgages. These mortgages may be adjustable-rate mortgages, fixed rate mortgages or a combination of both. They are usually taken at more or less the same time when the property down payment is lesser than 20 %. Doing this, borrowers can avoid paying private mortgage insurance.
Adjustable-Rate Mortgage Types
Adjustable-rate mortgages (ARMs) come in many flavors, colors and sizes. The interest rate fluctuates. It can move up or down monthly, semi-annually, annually or remain fixed for a period of time before it adjusts.
Mortgage Buy-downs
Borrowers who would like to lesser the costs of their interest rates can pull them down by getting a buy-down. A buy-down will require a homeowner to pay certain fees to bring down the interest rates on his/ her mortgage. Buyers, Sellers and even lenders can buy down the rates for a borrower.
Specialty Mortgage Loans
Streamlined-K Mortgage Loans
This is a type of loan wherein the homeowner is going to take out a loan to buy another house. The existing house will be used as collateral until it can be sold.
Equity Mortgage Loan
Equity loans are not primary loan. This is because they lie second to the existing loan. While a primary loan is intended for the purchase of a property, an equity loan can be taken out as cash. This loan may be fixed, adjustable-rate or be taken from a line of credit.
Reverse Mortgages
Reverse mortgages are another type of home loan and they are applicable to people over the age of 62. However, instead of the homeowner paying the lender, the lender will pay the homeowner for as long as the homeowner will live in the house. Interest rates may either be fixed or adjustable.
