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What are some basic types of mortgages?

Davie residents seeking to buy a home often have to take out a mortgage loan in order to purchase it. However, they may be surprised to find that these days there are a myriad of different types of mortgages to consider. Today, we are going to explore some of the types of mortgages that may be sought by those wishing to purchase a home.

One basic type of mortgage that has withstood the test of time is a fixed-rate mortgage. Fixed rate mortgages are amortized, which means that the buyer makes the same monthly payments until the loan is paid off. The payment periods could last anywhere from five years to 50 years.

There are also adjustable-rate mortgages. In these mortgages, the interest rate can change over time. Therefore, the amount a homeowner pays each month may change. There are many different specific types of adjustable-rate mortgages.

Another type of mortgage that may be sought is an FHA loan funded by the government. In this type of mortgage, the requirements for a down payment are not very onerous and a buyer's FICO score is not considered. This makes this type of loan attractive to qualified first-time homebuyers.

A fourth type of mortgage that may be available to some is a VA loan. VA loans are funded by a lender, but guaranteed by the government. They are available to qualifying veterans. What qualifies a veteran varies based on how long the veteran served and how the veteran was discharged. It is attractive because no down payment is required.

Then, there are interest-only mortgages. These mortgages give borrowers the ability to make payments on interest-only. However, borrowers only have a certain amount of time in which to exercise this option. Sometimes, a balloon payment is necessary.

These are only some basic types of mortgages. There are many other specific types of mortgages borrowers may want to look into, especially since a mortgage is often the largest loan a person will ever have. To learn more about their mortgage options, those wishing to purchase a home may want to seek legal help from a real estate attorney, so they can make an informed decision.

Source: the balance, "Mortgage Loan Types," Elizabeth Weintraub, Nov. 6, 2016

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