Mortgage Types
Below you can find some examples of the different types of mortgages to help you find the mortgage type that is right for you.
There are two categories of mortgages offered to someone seeking a home loan; Conventional and Government home loans. It is very important to research and understand the different categories of loans to find the best fit. Below we have given a brief description of and some examples of loans in each category.
Conventional
A conventional mortgage is offered by a lending institution to an individual whose loan can not be insured by such programs as VA or FHA (see below). There are several different types of conventional home loans. The most popular types of conventional mortgages are Fixed, ARM, and Balloon. A fixed home loan is set for a period of time, usually 15 or 30 years, during this time the interest rate of your mortgage will not change regardless of changes in the market. ARM (Adjustable Rate Mortgage) usually have a fixed period of anywhere from one to ten years, after the initial period your rate will change according to your margin and the index at that time. A balloon mortgage is a loan that has a set rate for 5 to 7 years, after the specified time period the rate of the loan changes and lasts for the duration of the loan.Government
There are two popular sub divisions within the government loans category, FHA and VA loans.FHA
FHA (Federal Housing Administration) loans aim to help people in the low to moderate income range. The FHA does not provide the funds for a family looking for a mortgage; however they do provide insurance to the institution providing the loan. The insurance provided by FHA protects interested parties in the case of a default on a home loan.VA
VA (Veteran's Affair) loan tries to help individuals who have either served in the military and do not have a dishonorable discharge. The VA loan is very attractive because it does not require a down payment from the person applying for the loan. This type of loan effectively replaces the protection the lender normally gets from a down payment on a conventional loan, allowing many veterans to purchase a home for the first time.The different types of loans can also have different types of interest rates applied to them; there is a fixed rate mortgage and an adjustable rate mortgage.
