Here at The Mortgage House, we help people with home loans in Buckhead, Duluth, Fayetteville, and the surrounding areas. If you are interested in mortgage loans, then give us a call for more information. In the meantime, we thought we would list some of the different type of home mortgage loans out there.
Fixed vs. Adjustable
All home loans fit into one of these broad categories:
- Fixed Rate: a fixed rate loan will retain the same interest rate throughout the entirety of the loan repayment. Even for long term home loans, that can be 30 or so years long, the same fixed rate will be paid monthly for the entire loan term.
- Adjustable Rate: Adjustable rate mortgage loans, or ARMs, will have an interest rate that adjusts from time to time. Typically, this will be at a yearly interval.
So what’s the difference in these loan types as it relates to you? That depends on your financial strategy. Adjustable rate loans will typically be offered at a much lower interest rate, at least initially. However, there is a risk you take that the interest may rise enough to outpace the fixed rate loan. With a fixed rate loan, however, you get rid of any risk of elevated interest charges, but the trade off is that your initial interest rate will always be higher than if you had gone with an adjustable rate loan.
Conventional Loans vs. Government Insured
Another difference in types of loans is whether they are backed by the government or a private entity. Any loan backed by a private entity is known as a conventional loan. Government loans, however, can come in three general types.
- FHA Loans: These loans come from the Federal Housing Administration run by the Department of Housing and Urban Development (HUD). The government backs these loans, available to first time and repeat buyers, for the lender in case of borrower default. Many people take advantage of these loans because they allow low down payments, sometimes as low as 3.5 percent of the asking price. However, these loans must be backed by mortgage insurance, which significantly increases the amount owed in monthly payments.
- VA Loans: Given out by the United States Department of Veterans Affairs (or VA), these loans are offered to military members as well as their families. It is essentially the same thing as an FHA loan, but available only to veterans and their families, as well as offering one exceptional perk; absolutely no down payment is necessary to get a VA loan.
- USDA/RHS Loans: These loans are managed by the Rural Housing Service (RHS) of the United States Department of Agriculture (USDA). It is a loan offered to rural residents on the lower end of the income scale. It is specifically for people who are employed, but are unable to obtain “adequate” housing by conventional financing means. To qualify for an RHS loan, income cannot be higher than 115 percent of the AMI, or adjusted area median income. This number varies from county to county.
While certain situations do call for government loans, conventional loans are much more prominent and easy to qualify for. If you are looking for home mortgage loans in Buckhead, then give The Mortgage House a call for more information on how our services can meet your needs. We want you to be happy with your decision, so we are glad to walk you through every step of the way until you feel confident you understand your choices. One of our friendly and knowledgeable representatives will be happy to answer any questions that you may have.