Are you getting ready to apply for a home mortgage and don’t know where to start?
Nobody will blame you. Getting a mortgage can be scary and confusing the first time around.
But it’s worth learning about and doing right. 63% of homeowners currently have a mortgage that they used to help pay for their home.
House buyers have plenty of options when it comes to mortgages. If you don’t know about them, then you may struggle to find the right one.
Keep reading to learn the five most common types of mortgages and what makes of them unique.
1. Fixed-Rate Mortgage
A fixed-rate mortgage is the most common type of mortgage you can get. If possible, this is the type of loan you want to get if you don’t qualify for a first-time homebuyer FHA loan.
A fixed-rate mortgage is popular because it’s consistent. Your monthly payments and interest won’t change over the lifetime of the mortgage.
Your payoff time can be between 10 and 40 years, but 15 and 30 years are most common.
2. Adjustable-Rate Mortgage
Mortgage lenders don’t give out as many adjustable-rate mortgages. This is because they aren’t as predictable as fixed-rate. Your interest rate can change through the lifetime of your loan.
Sure, you could see a drop in interest rates and pay less in the long run. But there’s nothing stopping interest rates from rising either.
You can use these mortgages if you don’t qualify for a fixed-rate mortgage.
3. FHA Loan
If you’re a first-time home buyer, then you likely qualify for an FHA loan. The government backs these loans through the Federal Housing Administration.
This loan will allow you to get away with a lower down payment for your first home. Many mortgages require a 20% payment to get them. An FHA loan requires as little as a 3.5% down payment to get.
4. VA Loan
If you’re a veteran, you qualify to apply for a VA loan. Like an FHA loan, the United States government guarantees these loans.
But unlike an FHA loan, you don’t need a down payment to qualify for one. You can get your first home and not worry about saving money for years to get one.
5. Interest-Only Loan
If the principal of your mortgage is too much for you to pay in the beginning, an interest-only loan is an option. No, you won’t only pay your interest for the lifetime of the loan. This period usually only lasts for around 5-10 years.
Only paying interest does slow down your repayment period. But it does give you an option if you need a home and can’t afford a large monthly payment for the mortgage balance.
House Buyers Have a Lot of Options
Do you not qualify for a regular mortgage? You don’t need to worry. House buyers have a lot of options available to them.
If the standard mortgage doesn’t work, then find another one that will help you get your dream home.
Once you get your home, you need to get it ready to live in. Head back to our home section to learn our home improvement tips that will make your new home shine.