Types of Mortages

Buyers and Sellers should have some general knowledge on various financing options. I have provided basic definitions, for more information and what types of mortgage will work for the sale or purchase of your home you will have to contact a lender. I can always recommend a reputable mortgage professional if you haven’t already chosen one.
All mortgages are called conventional unless they are government-backed loans. Conventional mortgages are made by private lenders.
Mortgages are generally available at 15, 20, or 30 year terms.
Conventional fixed-rate mortgages:
Constant interest rate and level, equal payments during a set period of time, most commonly 30 years. Down Payments are 5% and higher.
Adjustable-rate mortgages (ARMs):
The interest rate on an adjustable-rate mortgage changes throughout the term to stay current with the present interest rates. ARMs are most popular when rates are relatively high and appear to be dropping and when the difference between the ARM and the fixed-rate is greater than 2 to 3 percent. Different lenders offer variations in the front end of their ARM plans, such as the points you pay or discounted initial rates.
To make a useful comparison of an ARM rate, consider the index upon which the rate is based, the margin or spread between that index and the rate paid, and the intervals at which the rate and payments are adjusted.
Note: Always look at the index plus the margin when comparing ARMs. The larger the margin, the less likely the rate you pay will go down, even if the interest rates drop.
Federal government programs:
Federal Housing Administration (FHA) insured loans
Lenders offer FHA mortgages on a new or existing single-family home for as little as 3.5 percent down. FHA mortgages are also assumable. Sometimes a premium is required when the mortgage is assumed, then refunded when the note is paid off.
Veterans Administration (VA) guaranteed loans:
The Veterans Administration guarantees lenders against loss if a property is foreclosed due to default. These assumable loans are available to eligible veterans and may be used to buy, refinance, construct or repair a house. No down payment.
Farmers Home Administration (FmHA) loans /USDA:
The government makes these loans available to persons of moderate to very low income in rural or non-metropolitan areas. No down payment. There are income caps and guidelines as well as property location requirements.
Balloon mortgages:
Balloon mortgages offer very low interest rates for a short period of time—often three to seven years. Payments usually cover only the interest, so the principal owed is not reduced.
You should also discuss in detail with your mortgage lender the reason you are currently buying. How long you plan to stay in the home and your over all financial status so they can best assist you with choosing the right mortgage that fits your needs.

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