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Explaining The Different Types of Home Loans
4 Comments · Posted by admin in construction loans
There are many types of loans out there and it can be very confusing. This set of tips will give you an idea of the types of loans out there. Remember that loans vary depending on the bank, so be sure to do your homework.
Yearly Fixed Rate
A yearly fixed rate loan is the most common type of loan. You and your broker decide on your interest rate and the years that you have to pay off your loan. Loans start at 10-years and go all the way to 50-years.
Reduced Rate
A reduced rate loan is like a yearly fixed except you get a lower rate in exchange for your agreement not to refinance or sell within the first five years.
No Down Payment
If you don’t have a down payment, most banks offer a no down payment option. Most states also offer no money down programs. Ask your broker what is offered near you.
Construction
If you are planning on building your home, you’ll need to get a construction loan. Many banks offer interest-only payments until your home is done.
Adjustable Rate
A basic adjustable rate mortgage (ARM) is like a basic fixed rate loan except your interest rate will change during the life of your loan. How it changes depends on the going interest rates. There are also fixed period ARM’s, which means that a part of your loan has a fixed interest rate and another part will be flexible.
Low Document
Most banks offer low document loans. They have significantly less paperwork. This type of loan caters to self-employed borrowers who are unable to provide full financial statements and other evidence of their income.
Split Rate
Split rate loans combine fixed rate loans and adjustable rate loans. They’re great in times when the interest rates are fluctuating. The loan can be split many ways: 60% variable, 40% fixed or 50/50 splits are most common.
Line of Credit
Line of credit loans have become popular due to their flexibility and features. It’s like a credit card: it allows you to withdraw funds up to a set limit at any time
Non Conforming
Non-conforming (or jumbo) loans are for people who need to borrow anywhere between $417,000 and $2 million. These loans typically have higher interest rates and are for those with very good credit.
Beware of Honeymoon Introduction Rates
Some banks want your business so much that they’ll entice you with low interest rates, then forget to inform you that these rates only last six months to a year then skyrocket up. Make sure that you know your interest rate throughout the entire length of your loan.
Allan Wilson
http://www.articlesbase.com/home-and-family-articles/explaining-the-different-types-of-home-loans-95300.html
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Steele B · March 12, 2010 at 11:16 pm
Can someone explain the different loan options you have for buying a house?
I’m wanting to buy a house, does anyone have any knowledge on what the difference is between the different types of loans available? I’m looking at trying to buy a foreclosed or pre-foreclosed or a distressed home, for the intent of living in it until I make the repairs and face lift. Then of course sell it!
sunshine_today · March 13, 2010 at 4:18 am
They are called mortgage lenders. Make an appt with one today.
References :
derobake · March 13, 2010 at 4:20 am
I’m in the process of learning about mortgages myself. There are fixed rate, adjustable rate, baloon, interest-only, hybrid. If you only plan to hold onto it for a short period of time, an Adjustable Rate Mortgage (ARM) may be a better option since you get lower initial rates.
Be aware that mortgages have up-front costs (points and processing fees), so make sure that your potential profit from the house will be more than these costs. Also, be aware of all the other closing costs. Closing costs can be a shock to home-buyers.
I’ve been reading myfico.com and they are quite helpful. Try this:
http://www.myfico.com/LoanCenter/Mortgage/Step2/ChooseLoan.aspx
http://www.lendingtree.com/smartborrower/Guide-to-buying-a-home/Step-7-Choosing-the-right-mortgage.aspx
References :
Mark M · March 13, 2010 at 4:22 am
I won’t bore you with all the details of all the mortgage products out there for you.
The vast majority of mortgage loans, however, need your property you are buying to be in good, livable condition. Most Foreclosures do not meet this requirement.
What you want is an FHA 203k loan. Go here then email me.
References :
http://www.hud.gov/offices/hsg/sfh/203k/203kabou.cfm