Shopping for a mortgage loan is similar to looking for the right car. Out of all the various choices, you only want the one that matches your lifestyle and works with your financial situation. Lenders can tailor your loan to fit an affordable monthly payment, loan length and type of loan.
Here are the standard types of loans:
1. Fixed Rate Mortgage Loans
Loan Features
Provides equal monthly payment amounts through the loan’s lifetime.
Offers a shield against increasing interest rates with a locked rate.
Allows you to adapt if you’re planning to stay in your home a long period.
Your Benefits
Makes a stable and secure payment towards principal and interest during entire loan term.
Presents 15, 30 year terms with possible 10 and 40 year options as well.
2. ARM – Adjustable Rate Mortgage Loans
Loan Features
Provides for a higher priced home for a smaller monthly payment.
Offers more options if you’re going to relocate in several years and rate increases aren’t an issue.
Your Benefits
Initial rates are usually lower than fixed mortgage loans.
Offers different initial fixed-rate interest periods.
Fixed rate years/Adjusted rate year intervals of 5/1, 5/1, 7/1.
3. Government Insured Loans
Loan Features
Provided nationwide, by the Federal Housing Authority and the Veterans Affairs.
Allows flexible guidelines to qualify.
Offers both adjustable and fixed loans.
Your Benefits
Allows individuals and veterans with a low or moderate income opportunities to buy a home.
Helps those with little savings to finance a loan with low or no down payment options.
4. Interest Only (IO) Loans
Loan Features
Allows the smallest monthly payment possible, with an interest only payment for an initial period.
After initial period ends, payment significantly increases covering interest and principal.
Home equity is limited to down payment until payments include principal later on.
Your Benefits
Provides lower monthly payments to allow you to fund home remodeling to increase the home’s value.
Helps buyers with variable incomes based on commissions and bonuses.
5. Jumbo Mortgage Loans
Loan Features
Generally covers loans larger than $417,000.
Provides greater ability to borrow.
Your Benefits
Offers fixed rate or adjustable rates.
Allows you to purchase high priced properties.
