The Types of Home Loans

We all want to have a piece of property that we can call our own especially when speaking about having a house.  Choosing a property is a very important decision-making that involves many considerations. It requires a lot of thorough thinking in order to arrive to the best decision. Nowadays, homes with a relaxing ambiance and located in a good environment are getting more costly as they are becoming more in demand in the market.  Different lending companies and investors/lenders are offering you good and easy house installment plans or simply home loans.

·         Fixed-rate Mortgage

From the word itself, fixed-rate home loan has a fixed interest rate that stays unchanged throughout the term of the loan. Oftentimes, fixed-rate home loan is referred to as “plain vanilla” home loan as it is a fully amortizing mortgage loan. The good thing about fixed-rate home loan is that it definitely benefits the home buyer because the rate remains the same despite changes of interest rates in the market happening over the course of time.

·         FHA Loans

Federal Housing Loans or FHA Loan is when lenders allow borrowers to pay a small amount of down payment for the house in order to make the payments much comfortable and convenient. Almost anyone can qualify for this loan as it does not require any particular minimum income. The benefit of FHA Loans is that the borrowers are allowed to use gifts for down payment and closing cost purposes.

·         Conventional Loans

This type of home loan requires a down payment that ranges from 5 to 20 percent or more of the purchased house’s price. The interest rates of conventional home loans will be determined by the borrowers’ credit history. If one has a good or high credit score, the lower the interest will be. Conversely, if the borrower has a low credit score, then he is subjected for a higher interest rate. Conventional home loans are financed for a 15- or 30-year term.

·         VA Loans

Only American Veterans are qualified for this type of home loan or their surviving spouses ( as long as they do not remarry) can also benefit for this home loan. VA loans offer a long-term financing for American Veterans. Its main purpose is to provide home financing to eligible veterans especially in those areas where private financing is not available. The good thing with VA Loans is that no down payment is required.

·         80/20 Loans

80/20 Loans is actually involves two mortgages. The first mortgage is the 80 percent of the purchased price of the house.  The other 20 is the secondary mortgage, which is also called as an equity loan. To qualify for this home loan, one must meet a minimum credit score.

·         Adjustable Rate Mortgages

Adjustable rate mortgages or ARM has an interest loan that may change or is adjusted through the term of the loan.  Usually, this type of home loan has a fixed interest rate for a short period but then changes every often. The advantage of adjustable rate loan is when the loan rates will decrease on Fall.