KNOW YOUR MORTGAGE TYPES!
It’s important to get familiar with these common types of mortgages and mortgage terms before you begin the home buying process. You’re going to start hearing some of these words a lot!
Adjustable-Rate Mortgage (ARM) – a loan with an interest rate that is tied to a specified financial index. This index increases or decreases at scheduled time periods during the life of the loan. The loan interest rates is the sum of the a fixed margin that is added to the adjustable index over time.
Fixed-Rate Loan – a loan with an interest rate and payment that remains constant throughout the life of the loan. Interest is amortized over the loan period (30-year or 15-year) and factored into the monthly mortgage payment.
Interest Only – monthly mortgage payments consist of interest only for a specific period, usually 5 to 10 years. During the interest only period, your original principal balance remains the same, unless you choose to pay extra toward your principal at any time during the term of the loan.
Federal Housing Administration Loan (FHA) – FHA loans are available as fixed-rate and adjustable-rate mortgages (ARM). FHA loans are insured by the Federal Housing Administration and can offer low down payments as well as higher qualifying income ratios and lower FICO scores. There is a maximum FHA loan limit that varies from region to region by county.
United States Department of Agriculture (USDA) – designed for rural property purchase or refinance loans.
VA Loan – available to eligible veterans. The Veterans Administration guarantees the repayment of VA Loans to the lender in case of borrower default.