to Select an Agent
Reasons to buy a home
to Find a Home
"Things To Watch"
when viewing a home
Types of Loans You Should Know
is a Sales Contract
Ways to Ascertain a Down Payment
Lenders Approve Loan Applicants
of Closing Costs
Buyers' Resource Section:
-9 Types of Loans You Should Know About-
Here are nine different ways you could borrow the
money for the home of your dreams.
Conventional Fixed Rate Mortgage- Fixed rate loan
from a commercial lender for a term of 15, 20 or 30 years. Payments,
interest rates, and term are locked at initiation of contract. Usually
requires 5% down or lender insurance.
Adjustable Rate Mortgage- Or ARM mortgage
is similar in term to the conventional mortgages. However the interest
rate is only locked for a prescribed term of 1, 3, 5, 7, or 10 years.
After the initial term the interest rate fluctuates periodically
according to financial markets. There are usually some caps on the
interest rates built into the contract.
Federal Housing Authority Loan- The
Federal Housing Authority (FHA) insures loans for lenders. This
allows lenders to justify offering larger loans with smaller down
payments. These loans are always assumable for future buyers who
Veteran Affairs Loans- The Department
of Veterans Affairs provides government backed loans for qualified
veterans and servicemen. This type of loan allows the qualifier
to offer little or no down payment for the loan. These loans are
subject to the VA mortgage funding fee depending on the size of
the down payment. The VA mortgage funding fee is usually equal to
1% of the loan amount.
Assumable Mortgage- Simply take over
the existing mortgage. The most common assumable mortgages are FHA,
VA, or ARM mortgages. You take the current contract, with specified
payments, interest rates, and term remaining. The equity difference
is made up in the down payment.
Wrap Around Mortgage- This form or financing
uses two mortgages to equal the price of the home. Usually there
is an Assumable Mortgage with it's specific terms agreed upon by
the first borrower and the first lender. This portion is Assumed
just as in number 5. Then to make up the difference a new mortgage
usually at a much lower rate (due to the size) is added to the new
home buyer's obligations.
Buy Down-Mortgage - Usually involves
a third party, who gives the lender money up front in return for
a lower interest rate and lower payments, or a larger loan amount
at a low rate. Your particular lender's approach will determine
whether you have a permanent buy down, graduated or multiyear plan.
Two-Step Loan- 30 year loan that is
identical to an ARM loan except that the interest rate is changed
once over the term. The first step is usually 1, 5, 7, or 10 years
of the term.