Finding the Mortgage Loan that’s Right for you
By Sking on Nov 12, 2009 in Buyer Tips
If you are a first-time homebuyer, there are a number of questions you will need to research and ask your mortgage broker or lender; the first of which is: what types of mortgage loans are available to me?
Here’s the lowdown on the different types of mortgages that may be available to you for the purchase of your North Dallas home:
- Fixed-rate mortgages - Fixed-rate mortgages are the most simplistic of loans, as the interest rate and the monthly mortgage rate are both fixed for the life of the loan. Fixed-rate mortgages, which can be anywhere from 10 to 30 years, offer homeowners the practicality of knowing what their mortgage payments are going to be, thereby facilitating the process of making a budget.
- Adjustable-rate mortgages - Adjustable rate mortgages, most commonly referred to as ARMs, have gotten a bad rap since the downfall of the housing market. This is due to the fact that many homeowners took out mortgage loans that they couldn’t afford because they were able to snag a low ARM.
Many of these consumers, given the fact that real estate was skyrocketing in most parts of the country, thought that they would simply refinance or sell when their ARM adjusted to a higher rate. However, because of the decline of house values, many of these consumers simply didn’t have the equity in their homes to refinance or sell; thereby leaving them with home loans that they couldn’t afford.
ARMs can still be a good move for some homebuyers, though, as they usually start with a lower, fixed rate that changes to a variable rate at some point into the loan term. The lender then adjusts the rate of the loan, either up or down, depending on current interest rates.
- Balloon Mortgages - Balloon mortgages are mortgages that begin with a fixed interest rate over a fixed number of years. Once the fixed terms ends - which is usually seven years - the lender requires the loan balance to be paid in full.
- Federal Housing Administration Mortgages - Federal Housing Administration Mortgages (FHAs) are specialized mortgages which allow homebuyers to purchase a home with as little as three percent down. These loans generally are through lenders affiliated with US Department of Housing and Urban Development (HUD).
