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One of the most important factors of the home buying experience is the mortgage loan you undertake. With at least eight different types, there are five that are the most common. The following types of mortgage loans are the ones held by most homeowners in the United States.
A conventional mortgage is the standard mortgage that comes to most people's minds when they think about qualifying for a loan. Distinguished because of their fixed interest rate and consistent monthly payments, conventional mortgages are available in terms ranging from 10 to 40 years with 15 and 30-year loans the most common.
An adjustable-rate mortgage might also be referred to by its acronym: ARM. There are a number of different types of ARMs but their basic premise is the same. The interest rate tied to the mortgage fluctuates according to factors like changes in the cost of borrowing money and other economic factors. The 5/1 loan is a common type of ARM. The interest rate charged on the loan remains the same over the first five years of the loan. For the remaining 25 years, the interest rate can change.
An interest-only mortgage can be a valuable economic tool but it's best undertaken by those who understand its implications. During the first 5 or 10 years of an interest-only mortgage, you can opt to pay only the interest on the loan. You aren't obligated to pay only the interest during that time. After the first 5 or 10 years, the loan is treated like its a conventional mortgage.
VA loans are backed by the federal government, overseen by the Department of Veteran Affairs and don't require a down payment. These loans are limited to members of the military. In some cases, spouses can take advantage of VA loans.
Backed by the Federal Housing Administration, FHA loans include mortgage insurance that is built into them. This helps protect the lender in the event that the home buyer cannot repay the loan. FHA loans also have lower down payments which are designed to help more people purchase a home.
In some cases, a seller might not want to participate in a particular mortgage loan. Your real estate agent is a great source of information about mortgage options, check with them for more guidance.
Lenore has been a Collier County resident for over 40 years. She fell in love with Naples and surrounding areas and decided to make the move from Cleveland in December 1981. Lenore has a Bachelor of Arts Degree from the University of South Florida where she met her husband of over 25 years. They have two children that attend University of Florida and Florida Gulf Coast University. She has worked as a Community Service Deputy with the Collier County Sheriff’s Office, a Guest Teacher with the Collier County Public Schools, and continues to serve on many committees with the Parent-Teacher Organizations in Naples. Lenore has a true passion for Naples and is excited to put that passion to work for her customers. Whether you need an expert guide in buying a home, or a dedicated leader to sell your property; her love of Naples will always give you piece of mind in your real estate venture.