Types Of Mortgages You Can Avail For Buying Your House
Owning a house is a huge responsibility, and it is surely one of the biggest assets you will ever have. However, for most of us, buying a house involves taking a loan, too. Loans or mortgages are of various kinds based on the place you live, how long you plan to stay there, your monthly income, and many other factors. Once you understand that one size doesn’t fit all, it is mandatory to go home loan shopping. Finding out lenders, what they are offering, how safe the providers are, and several others that must suit your needs are all important. So here are the various types of home loans that you might come across when you are looking to get the house of your dreams.
The Fixed Rate Loan
This is perhaps the most common kind of loan for people who are not risk-takers. It involves a fixed rate which means that the interest rate will be the same throughout the tenure of the loan usually 15 to 30 years long. Homeowners who are looking for a stable interest rate that won’t be affected by the rise and fall of the market can avail this kind of loan. It is also good for people who know that they are going to stay in that house for at least the better part of their loan years. The whole plan is quite predictable, and you know that by paying a certain sum of money every month which you can pay off your loan in a certain number of years.
The Adjustable Rate Loan
For those who are looking for lower interest rates, this kind of loan is for you, but you must know that the interest rates are locked for just 5 or 10 years. After this period of time, the rates might change — it can either go up or go down. Depending on that, your monthly payments might increase or decrease. Those who do not have plans of staying in their house for a very long time often opt for this kind of loan. Most people who fail to get a good fixed-rate loan or are planning to move out before their fixed-rate tenure is over go for this kind of loan.
Federal Housing Administration Loan
Even though you take a loan, you still need to make a downpayment of at least 20% of the actual amount. The Federal Housing Administration loan enables you to make a down payment of as less as 3.5%. This is especially good for those who do not have much saved up. However, an FHA loan comes with its own limitations. For example, the amount of loans are limited, and so are the rates which are usually given for 15-30 years. The borrowers are also required to pay a mortgage insurance.
These are the rural development loans made for families residing in the rural areas of the USA. Since these families are usually struggling to make ends meet, the government helps them with the house loan — they finance it 100%. Which means neither do the families have to pay a down payment nor do they have to pay on high-interest rates. The only catch here is that the loan amount cannot exceed your income by more than 41%.
As the name suggests, a bridge loan is a kind of repeat refinancing. For homeowners who are already paying one mortgage and wants to sell off that house to buy another, a bridge loan helps them merge the two mortgages. However, to get a bridge loan, you need to have an excellent credit score. Also, the combined amount from the two loans should not be more than 80% of the financing. Since the loan helps those who are in the transitional phase, it is called a bridge loan.
Now that all kinds of mortgages are clear to you, it will be easier for you to buy that dream house you have been thinking of owning for years now. Buying a house is no joke. Taking a loan that you would be repaying for several years of your life needs a lot of planning. Don’t end up taking the wrong loan that will put in a spot instead of helping you. Taking the right kind of financial decisions often help a lot in growing your wealth. So, make the right choice!
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