New Mortgage Loans or Refinance Your Home

Types of Mortgage Loans

Let’s start at the very beginning. The most common types of mortgages are Conventional, ARM, and FHA loans.

Conventional: Typically a conventional loan has a term of 15 to 30 years and will always have a fixed rate of interest for the life of the loan. This allows for a predictable and steady payment from start to finish.

ARM (Adjustable Rate Mortgage): This mortgage is just as it says, adjustable, meaning the interest rate fluctuates over the life of the loan. The fluctuations are tied to the current market terms and are usualy set to change at specific points throughout the life of the loan. This means, of course, that the payment due will fluctuate with the changes in the market.

FHA (Federal Housing Administration):  An excellent option for the first time homebuyer. Available at most banks and institutions the FHA loan requires only a 3% down payment. Further, this down payment can be accomplished through various assistance programs.  Because the federal government guarantees the repayment of the loan, the approval process can be less grueling than any of the other options.

VA: A special type of loan issued by a private entity but guaranteed by the U. S. Department of Veterans affairs. It began in 1944 and provides loan options with favorable terms to qualifying veterans. One of the most crucial qualifications are that the veteran has to be purchasing the property to be used as their own personal residence.

With any loan, it’s important to comparison shop and thoroughly understand the options available and the terms of the mortgage. In other words, here is a time when you really need to read the fine print. The loan with the lowest interest rate initially is not always the most economic option. Understanding the terms of your loan before committing to it will avoid complicated surprises down the road.  You are, in effect, shopping for a loan.

Perhaps you’ve heard of programs available to first time homebuyers and you’re interested in taking advantage of the special offers? Or perhaps you’re no longer a first time homebuyer and you’re wondering is there anything left for you?

If this is your first mortgage, an excellent place to start is the FHA website. There you will find a detailed listing of programs available to first time buyers and their various benefits. A qualified mortgage broker can help you determine the most appropriate program for you, but here is a quick run through of the most popular options:

Ameridream: Gift funds of up to 10% of purchase price.

Nehemiah: Up to 6% of final contract price towards down payment or closing costs.

American Family Funds: Run by a non-profit charity called The Dove Foundation, they offer down payment assistance to pre-qualified FHA loan applicants. Amounts will vary.

If you’re not a first time homebuyer, but are interested in specialized loan programs there are several options available to you as well.  It should be stated that FHA loans often offer the best deals and are not limited to first time homebuyers.

You may also consider location specific loans. For instance, the Department of Agriculture Rural Development Housing & Community Facilities offers special financing options for buyers in rural areas. Alternatively, the Department of Housing and Urban Development offers specialized funding for one to four family dwellings in need of rehabilitation; it’s called the 203k program. You can find more information about these on their respective websites or through your qualified mortgage broker.

Educate yourself on the various options available to you and keep an open mind. If you’re willing to think outside the box there are a number of options available to help make home ownership affordable for first time and experienced homebuyers alike.

-L. Steele (ExperienceCreditUnions.com Staff Writer)