Types of Mortgages Available

You Have Choices

When it comes to buying something as expensive as a home, there is no one-size fits all option for mortgages or loans. Most lenders, therefore, offer several types of loans to people who are shopping for a house. Which type of loan you can get or qualify for depends on various factors in addition to your credit.

Conventional Loans

Conventional loans are your most straightforward way to get a loan. They come in two varieties, with one significant distinction: the interest rate. FIXED RATE loans are loans that are usually set for 15 or 30 years and the interest rates on the loan never changes despite the rise and fall of the economy or other factors that would otherwise affect the interest rate. The other type of conventional loan is the ADJUSTABLE RATE or ARM loan. ARMs usually start off with an extremely low interest rate and may then, after a period of several years, begin to adjust according to marketplace fluctuations. There is also the option of an Open ARM, which allows you to choose from a couple of options each month, including not paying the full interest amount every month. This is easier in the short term, but has the effect of leaving more loan to be paid off later.

The 80/20 Loan

80/20 loans are actually two loans combined to serve one purpose. This type of loan is usually offered if your credit is not sufficient to entice a lender to take on 100% of the risk of your loan. If you can get one bank to lend you 80% or 70% of the loan, you can probably get another bank to give you a loan for the remaining 20% or 30%. This will leave you with two mortgages to pay to two lenders totaling 100% of what you otherwise would have paid to the one. If you still have unanswered questions about mortgage loans, do not forget to check out the frequently asked questions.