Types Of Mortgage Loans The Basics

Types Of Mortgage Loans The Basics



Types of​ Mortgage Loans – the​ Basics
In the​ past,​ homebuyers more or​ less had limited mortgage loan options .​
These days,​ there are more options than you​ can shake a​ stick at,​ but here’s a​ primer on​ the​ basics.
Mortgage Loans
With the​ real estate market explosion over the​ last 10 years,​ a​ call has gone out for unique mortgage loan programs .​
Bankers have been more than happy to​ answer the​ call .​
For many borrowers,​ traditional mortgage loans still fit the​ bill .​
Here’s an​ introduction .​
1 .​
Conforming Loans – the​ loans comply with requirements set down by Fannie Mae and Freddie Mac,​ two government sponsored entities that buy and sell loans from mortgage lenders .​
These entities put strict caps on​ the​ loans they will buy,​ with single-family homes having a​ mortgage cap in​ the​ range of​ $360,​000 .​
With the​ booming real estate market,​ many areas such as​ San Diego do not come close to​ fitting into the​ conforming loan market since homes average in​ the​ $600,​000 range .​
2 .​
Non-Conforming Loans – Known as​ Jumbo Loans,​ these mortgages are written for loans that exceed the​ $360,​000 cap mentioned previously .​
They tend to​ have slightly higher interest rates,​ but are readily available .​
3 .​
Bad Credit Loans – in​ the​ mortgage industry,​ mortgage brokers often refer to​ a​ borrower’s paper .​
This paper refers to​ people with less than stellar credit .​
B paper refers to​ relatively small problems,​ while D paper refers to​ bigger issues such as​ bankruptcy filings .​
The worse your paper,​ the​ more you​ can expect to​ pay in​ interest,​ points and down payment amounts .​
You need to​ carefully determine whether paying these extra penalties makes financial sense .​
Interest Rates
With each of​ the​ above loans,​ you’ll have an​ option of​ going with a​ fixed interest rate or​ an​ adjustable rate .​
Fixed interest rates simply set a​ definitive interest rate that will be charged over the​ length of​ the​ loan .​
Adjustable rates typically start at​ a​ figure lower than fixed rates,​ but can be moved up to​ reflect changes in​ the​ cost of​ borrowing money .​
In many ways,​ you​ are betting whether interest rates will increase in​ the​ future .​
For a​ great majority of​ people,​ basic mortgage loan options still suffice when it​ comes to​ borrowing money .​
Don’t fret if​ you​ have problems qualifying for these loans .​
There are many other options on​ the​ market these days.




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