Home Mortgage Loan Types

Home loan types include fixed rate, adjustable rate, interest only, FHA, VA, reverse mortgages, USDA mortgages and more.  Mortgage rates for any home mortgage loan can differ widely.


Types Of Mortgage Loans....

Fixed Rate Home Mortgage Loans
With a fixed rate mortgage, you know exactly what your principal and interest payment will be each month for the life of your loan.  It won’t change because your interest rate doesn’t change.  Your taxes and insurance component of your payment towards escrow can change (and probably will) if your taxes and insurance change.  Unfortunately, there’s no way to lock those in.  If interest rates go up, you’re protected with a fixed rate mortgage.  But, you won’t benefit if rates go down.  You can always take advantage of falling rates by refinancing.

Fixed rate mortgages might be right for you if:

Want the security of a fixed principal and interest payment.
Think that interest rates will go up.
Are on a fixed or limited budget.


VA Home Mortgage Loans
VA home loans are guaranteed by the US Department of Veteran Affairs.  These mortgage loans are offered specifically to eligible veterans for home purchases, rate and term home loan refinances or cash-out mortgage loan refinances.  VA loans offer many advantages to qualified veterans.


Jumbo Mortgages
Jumbo Mortgages or nonconforming loans exceed the loan limits set by the two publicly chartered corporations (Fannie Mae and Freddie Mac) that buy mortgage loans from lenders.  The 2009 single family loan limit is $417,000.  If you need to borrow more than that amount, you need a jumbo mortgage.  These jumbo mortgages typically have a higher interest rate than conforming mortgages.


Reverse Home Mortgage Loans
Reverse mortgage loans are available to individuals aged 62 or older.  These home loans actually pay the borrower.  With reverse home mortgage loans, borrowers can receive a lump sum, monthly payments or hold the sum in a savings account as a credit line.  Unlike traditional home equity loans, a borrower does not qualify on the basis of income but on the value of his or her home.  In addition, the loan does not have to be repaid until the borrower no longer occupies the property.  If you are a senior looking to cash out the equity in your home, a reverse home mortgage loan could be a great option.


Home Equity Line of Credit
A mortgage loan, usually in a subordinate position, that allows the borrower to obtain multiple advances of the loan proceeds at his or her own discretion, up to an amount that represents a specified percentage of the borrower's equity in a property.


Debt Consolidation Home Mortgage Loans
If you have debt outside of your home loan, you are likely paying a much higher interest rate than you should be.  Credit card interest rates can be as high as 25%.  Refinancing your home mortgage loan to pay off and consolidate debt under one low mortgage rate is a smart maneuver.  Refinancing your home loan could save you a great deal of cash every month.


Cash Out Home Mortgage Loans
You can obtain a refinance home mortgage loan to get cash out for a variety of purposes, including education expenses, vacations, other investments, home improvements and more.


Adjustable Rate Home Mortgage Loans
Compared to fixed rate mortgages, Adjustable Rate Mortgages (ARMs) offer a lower interest rate to start, so your monthly payments are generally lower.  But, the interest rate moves up and down with the market based on an "index".  Some of the more common indices include U. S. Treasury Bills, Cost of Funds Index (COFI) and the London Interbank Offered Rate (LIBOR).  Most ARMs have an initial fixed rate period where the interest rate doesn’t change followed by the rest of the loan’s lifetime period where the rate is adjusted at predetermined intervals.  Many ARMs have caps that limit how much your interest rate can change per period as well as for the life of the loan.

Also be aware that there are some very low rates ARMs that start out with "discounted" rates.  These discounted rates are below the market rate and will definitely go up at the first adjustment period.

Adjustable rate mortgages might be right for you if:

You want more property than you can qualify for now with a fixed rate.

You are confident your income will increase or rates will not go up much.

You plan on selling or refinancing within seven years of buying your home.


Interest Only Home Mortgage Loans
With interest only home loans, you only pay interest during the initial interest only period.  This type of home mortgage loan allows you to lower your initial mortgage rate, lower your initial monthly payment, qualify for a larger loan amount and free up cash for other uses.


Construction
Construction loans are used to finance the building of a new home rather than purchase an existing home.  They are usually variable-rate loans that have interest only payments during the construction phase.  Draws are scheduled based on the stages of construction to pay the builders.

Many construction loans are construction-to-permanent which means that when construction is complete, the loan is converted to a normal mortgage.  This has the advantage of a single loan with one closing.


USDA Home Mortgage Loans
USDA home loans are offered in rural areas as determined by the United States Department of Agriculture (USDA).  The USDA’s mission is to help lower income households obtain home loans at reasonable mortgage loan rates.  USDA home loans offer many advantages to qualified borrowers.


Divorce Buyout Home Mortgage Loans
Many home mortgage loans are tailored for people with special circumstances.  The Divorce Buyout Mortgage allows one spouse to keep the house, possibly get cash out if needed, and remove the other spouse’s name from the current home loan, thus eliminating any undue financial liability for the home loan.


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