What Mortgage Options Are Available To A Homebuyer

What Mortgage Options Are Available To A Homebuyer

What Mortgage Options Are Available to​ a​ Homebuyer?
Buying a​ home is​ something that most people look forward to​ .​
When it​ comes time to​ look at​ the​ various options that are available for mortgages,​ though,​ the​ questions start to​ arise .​
There are so many different options that it​ can definitely be confusing .​
Here are some brief descriptions that explain your different loan type products.
Every mortgage will fall under one of​ two general types - it​ will either be a​ fixed rate mortgage or​ an​ adjustable rate mortgage .​
Here are definitions of​ these two types.
Fixed Rate Mortgages
A fixed rate mortgage is​ one in​ which the​ interest and payment rate always stays the​ same .​
It does not matter what happens to​ the​ market - good or​ bad,​ your payment does not change .​
This is​ especially good when the​ market is​ changing or​ the​ economy is​ fluctuating.
Adjustable Rate Mortgages
An adjustable rate mortgage is​ one that changes periodically in​ order to​ reflect the​ economic conditions .​
Most people get these mortgages because it​ allows them to​ get a​ little bigger house than they could otherwise afford .​
These usually have a​ fixed rate portion for a​ few years first,​ then the​ rate changes regularly - could be monthly or​ yearly .​
This type of​ mortgage is​ the​ best when the​ economy is​ good,​ but could be very costly in​ times of​ adverse economies.
Among these two types of​ mortgages,​ there are different names that could come under either general type.
Balloon Mortgage
This type of​ fixed rate mortgage and is​ generally for 5 to​ 7 years .​
It does not fully amortize by the​ end of​ the​ term since it​ is​ usually refinanced for a​ 25 or​ 30-year mortgage .​
This option must be stated in​ the​ terms,​ though,​ so be sure it​ is​ in​ there,​ or​ you​ may be left without being able to​ refinance.
Jumbo Mortgage
Two of​ the​ largest loan agencies in​ the​ US - Fannie Mae and Freddie Mac,​ set ceilings on​ the​ amount of​ loans that they will give to​ a​ borrower for a​ home .​
Any mortgage requiring more than this is​ considered a​ jumbo mortgage .​
They may also be called a​ non-conforming mortgage.
Assumable Mortgages
An assumable mortgage is​ one that the​ new buyer of​ the​ house simply takes over without
any refinancing .​
The terms that enable this kind of​ transfer must be in​ the​ contract when applied for,​ or​ it​ cannot qualify as​ an​ assumable mortgage .​
It will also require the​ lender’s permission and the​ new owner must qualify before being approved .​
Under some conditions,​ some of​ the​ terms may be changed,​ and closing costs will be involved .​
Taking over an​ assumable mortgage cold turn out to​ be very good for the​ buyer – especially if​ the​ interest rate is​ better than what the​ market is​ offering at​ the​ time .​
Both types,​ fixed rate or​ adjustable rate,​ can be assumable.
Interest Only Mortgages
While the​ title of​ this mortgage is​ more than a​ little deceiving,​ it​ is​ not what it​ seems .​
It would be more truthful to​ say interest first mortgage than anything .​
With this type of​ mortgage,​ the​ interest is​ paid first,​ leaving the​ principal untouched until the​ interest is​ paid .​
Generally,​ this means more is​ paid because the​ principal is​ not paid down at​ all .​
This would normally slowly reduce your interest .​
The difference could result in​ thousands of​ dollars more being paid over the​ lifetime of​ the​ mortgage.

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