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Mortgage Loan Options You Should Consider

Mortgage Loan Options You Should Consider

When you’re buying a house, you’ll find that a variety of mortgage loan options are available to choose from. The question is, which one is right for you? Make sure you explore all of the options before you commit to something you may later regret.

  • Fixed Rate – Also known as “conventional” mortgages, this option is simple and straightforward. You commit to a fixed interest rate, which means that if interest rates rise after your purchase, your interest rate stays the same, and your monthly payment remains the same throughout the life of the loan. And you don’t have to come up with a huge down payment. If you plan to keep your home for several years, this is an excellent option to choose.
  • Adjustable Rate (ARM) – If you plan to sell your home a few years after your purchase, this option may be better for you. Your initial payment is a lot lower, so you can get a more expensive home than you might otherwise be able to purchase. The only real problem with this type of mortgage is if the real estate market tanks when you’re ready to sell. You could end up in a world of financial hurt.
  • FHA and VA – These are government-sponsored loans that assist veterans and people with low to moderate incomes who want to purchase a home. Flexible qualifications and minimal down payment options give first-time homebuyers the chance to make their dreams of owning their own home come true.
  • Jumbo Loans – People who purchase very high-priced homes can gain borrowing strength by taking out one of these loans. Jumbo loans cover mortgages that total over $417,000, up to $3 million, or unrestricted if a down payment of 30 percent or more is provided. Second home and investment properties may be purchased under a jumbo loan.
  • Balloon – This type of loan is generally used for the purchase of bare land. The payments start at an affordable amount, but after five to seven years, the remaining balance is due in full. Typically, people who purchase land with a Balloon mortgage expect to build their home and have the land’s mortgage rolled into the home’s mortgage, thereby avoiding the balloon payment. However, this can be a risky venture.

Other financing options are also available, and buyers can choose from 15- or 30-year loans as well. Again, it’s always best to review all of the options available to you before making your decision. Keep in mind your other monthly expenses when you are determining how much house you can afford, and don’t let anyone talk you into purchasing outside of your means.

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