What are the types of mortgage loans? This the question we are trying to answer on this write up. People who are planning to acquire real estate properties should first consider in which means they will be able to pay for such purchase. Obtaining a mortgage loan is one of the safest and popular ways to do just that. But what options are available to these people? The following sections will deal on that matter. After you the read the contents of this article wholly, hopefully, you will be able to not only know but have an in depth understanding of the different mortgage options available. For the sake of being concise and brief, let us only discuss basic and government guaranteed mortgage loans in the following sections.
Basic Mortgage Loan Options
One of the most popular and simple financing options is the fixed rate mortgage or FRM. Seventy percent of the existing property purchase transactions are financed in this manner. This is due to the fact that this format provides for much needed stability compared to other financing options. Regardless of the market rate, the interest remains constant although out the duration as when the loan was made. In other words, the mortgagee pays the same amount every month until all of which has been paid. Additionally, the duration in which the loan is payable depends on the terms agreed by the parties involved, 15 and 30 years being the most common. On the other hand, a totally different financing option has been gaining quite amount of popularity in the recent years. In this option, loans are tied up to an index which changes in relationship to the prevailing market rates. Most commonly intervals at which these changes can occur are set in contract. Additionally, caps are made to control at which amount payments can increase or decrease in a given period. This type of mortgage loan is called adjustable rate mortgages.
Government Guaranteed Loans
Government guaranteed loans exist as mortgage combining elements of FRMs and ARMs. The FHA loan, a variation of the FRM, is a government guaranteed loan that seeks to help first time home buyers with moderate to low income. It has a very low interest of three percent and minimum required down payment. It easy to obtain for as long as the property acquired will be occupied by the mortgagee. The VA loan, another government supported loan, is a privilege given to formerly active members of the military or surviving spouse of active members who had rendered military service. This requires only a minimum amount as down payment and mortgagees must display the ability to pay monthly billings.