Buying a home is both one of the most exciting events in a person’s life and one of the most stressful. Ensuring you find the right house while also deciding on the proper mortgage that will set you up for a successful future can be an extremely difficult task, but with the right help it is more than possible. Below we have listed the four most popular mortgages when it comes to real estate, so read on if you’d like to find out which of them is best for you!
Fixed Rate Mortgages:
Easily the most popular of any home mortgage, a fixed rate mortgage basically means that a set interest rate is applied to your loan, which provides a very stable and consistent monthly payment. The length of these fixed mortgages can range from anything as long as 30 years to a much shorter 15 years, which obviously just means you will be paying it off in smaller increments over a longer period of time or vice versa. While close to 90 percent of home owners opt to go with the 30 year mortgage to start, due to the lower monthly payments, the interest you pay on a short 15 or 20 year mortgage can make for a much more reasonable loan, because it is much lower considering how low the liability is for the bank.
Adjustable Rate Mortgages:
While this is a less popular option than a fixed rate mortgage in the United States, many different parts of the world like Britain and Australia frequently take advantage of an adjustable rate mortgage (ARM). The reason it would be wise to consider an ARM is because you are able to take advantage of lower interest rates in a given year without refinancing your home. On the flipside, there is always the chance that the rates will go up, causing your payments to increase with it, but there are many benefits to keeping your mortgage open to a yearly reassessment of its interest.
This is a much different and specific type of mortgage, which is best used only if you have a strong guarantee that you will have the money necessary for the loan in the foreseeable future. Balloon mortgages are often shorter in length, around 10 years and have much lower payments throughout a majority of the mortgage term. Your payments are often just the interest for a large portion of the term, however, the catch is the fact that you are required to pay a majority of the entire mortgage sum at the end of the term. There are a lot of upsides to a balloon mortgage, but the circumstances have to match up very specifically to make it a good fit.
An FHA loan is for a very specific group of borrowers, but can nonetheless be extremely beneficial if you qualify. Designed to be for lower income individuals that are looking to secure a home, Federal Housing Administration loans are approved in order to offer lower minimum down payments for those that can’t afford a large lump sum at signing. They also have a lower threshold for the necessary credit score in order to allow families that have less immediate income to purchase. Oftentimes this type of loan is used by first time buyers and eventually refinanced over time if their financial circumstances improve, but it is important to understand that the smaller the down payment you make, the more you will owe over the course of the mortgage.
As is evident in our article, there are many different types of loans that serve a large number of purposes for those that use them. Regardless of what you may be looking for when it comes to your mortgage, there is an option out there for everybody. At American Mortgage Resource, we want nothing more than to walk you through the home-buying process and determine what type of loan works best for you. Come in today and start the next great chapter of your life!