There are several kinds of mortgage loans to satisfy diverse borrower needs. The type of mortgage that works for you will be dependent on how long you expect to own the home, your down payment funds and what you qualify for.
Fixed-rate mortgages make up the majority of loans originated and work well for long-term home ownership. The interest rate and monthly payments are fixed for the term of the loan. There are 10-, 15-, 20- and 30-year terms.
The adjustable-rate mortgage (ARM) is a flexible loan because the interest rate you pay may go up or down. The initial rate is usually lower than that of a fixed-rate mortgage.
After a period of low fixed monthly payments, the ongoing monthly interest rate will be based on a fixed margin added to a fluctuating cost-of-funds index. Borrowers seek this kind of loan for shorter-term home ownership because of the lower initial rates.
Conventional loans are not offered or secured by any government entity. Banks or mortgage companies usually make these loans with 20% down but will originate the loans with less than 20% down with added mortgage insurance.
FHA, VA and USDA loans are government-guaranteed loans with specific requirements for eligibility and typically have lower interest rates than conventional loans.
A loan can be a closed or open mortgage, depending on if there is a prepayment penalty for early payoff. The closed mortgage bears penalties if paid off or refinanced prior to its term.
Contact me, and together, we can determine which of these loan programs works best for your situation. I am always here to help, and I am just a call or email away.