Loan Types 101
DIFFERENT LOANS FOR DIFFERENT FOLKS
There are so many different types of mortgage loans on the market today, determining
your best loan type can feel overwhelming. That's why we recommend that our clients
us our trusted partner, Founders Bank and Trust. Whether you meet with a mortgage
specialist from Founders for a local solution, or shop and search for loans, you'll
want to first familiarize yourself with loan types.
Fixed-Rate Mortgage. With a fixed-rate mortgage, your interest
rate stays the same for the term of the mortgage, which is usually 30 years. Your
principal and interest payment remains stable, making it easier to plan a monthly
budget.
However, initial interest rates tend to be higher than with other types of loans.
Adjustable-Rate Mortgage. With an ARM, your interest rate and monthly
payments start out lower than with a fixed-rate, but your rate and payments can
change either up or down, depending on where interest rates in general are going.
(If they’re going up, your monthly payments will probably go up
as well, sometimes significantly.)
FHA-Insured Mortgage. In this type of loan, the Federal Government
insures the lender against loss in case the home buyer defaults on the loan. This
program was set up so that Americans who can’t afford the 10 percent to 20
percent down payment required by most lenders can still buy a home. Many HUD Homes
can be bought with FHA-insured mortgages, which allow you to
purchase the home with a low down payment. You do not have to be a first-time buyer
in order to qualify for an FHA loan.
VA Loan. Under this program, the Department of Veterans Affairs guarantees
the lender against loss. HUD Homes may be purchased with a VA loan or any other
loan.
Assumable or Non-Assumable. You may find a home with a mortgage
loan you can “assume” from the previous owner. This means that the lender
is willing to transfer the old loan on the home to you. These loans can be wonderful
bargains, and the paperwork is usually not very complicated.
Before you decide which loan is right for you, talk to your loan officer. You’ll
get information that will help you figure out which option best suits your needs.