Types of Mortgage Loans for Homebuyers

In present day, there are several types of mortgage loans that certain buyers can qualify for. Below are 8 types of loans. Which one is for you? Call SD Property Shop today!

Fixed-Rate

Your interest rate and monthly payments stays the same for the loan term but if interest rates decline, you’ll be stuck paying a higher rate unless you refinance. Pay extra towards the principal each month if possible. This will reduce the lifespan of the loan and save you tons of money via reducing the amount of interest you pay on top of your original loan amount.

Standard Lengths: 10 years, 15 years, 20 years, 30-years

Most Common: 30 Years because it makes your monthly payments the lowest.

Adjustable-rate mortgage, or ARM

Offers a lower initial rate of interest than fixed-rate loans and interest rates can go up or down from year to year. But after the initial period, rates can change over the life of the loan. If interest rates rise, so do your loan payments so you will be paying more each month.

Hybrid ARMs:

Feature aspects of both adjustable-rate and fixed-rate mortgage. After the fixed-rate period, the loan is amortized over the balance of the term with a rate that adjusts annually. Usually, there will be a cap on the initial interest rate reset that is higher than all of the subsequent rate adjustments, and a cap on the amount the rate can change over the life of the loan.

Standard Lengths: 3 year, 5 year, 7 year, 10 year fixed interest rate period.

Interest-only Mortgage Jumbo Loan

Common type of buyers: Affluent homebuyers with irregular incomes. It allows the option of paying only the interest for the first few years of the loan. Interest-only loans are structured like an ARM’s.

Minimum Loan Size: $625,500.

Standard Lengths: The interest-only period lasts for the first 5, 7 or 10 years then the rate adjusts annually where the borrower pays the principal and interest.

Federal Housing Administration (FHA)

This loan permits buyers who may not qualify for a “conventional” home loan to obtain a loan with a low down payment. Unfortunately, the the size of the loan may be limited.

VA Loan

Eligible military veterans can receive these guaranteed loans. This loan is available for active duty personnel and surviving spouses. It offers competitive rates, with low or no down payments. Unfortunately, the the size of the loan may be limited.

Balloon Mortgage

This loan is a fixed rate loan and has low payments for a fixed period. After an initial period, the entire balance of the loan is due immediately which makes it risky for some borrowers.

Reverse Mortgage

This loan allows senior citizens to convert equity in their homes to cash. They don’t have to pay back the loan and interest as long as they occupy the house. Check to make sure the loan is Federally insured.

Please do you due diligence when considering the types of mortgage loans for homebuyers. You don’t want to get stuck in a bad financial situation. Please contact us at any point for home loan assistance.

SD Property Shop Contact Info
info@sdpropertyshop.com
www.sdpropertyshop.com
Courtney Cameron, Realtor
Realty ONE Group
619.734.9888
CalBRE 01766250
3 locations to serve you — Rancho Bernardo, Mission Valley and Carlsbad
Hours: Call or Email anytime.

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