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If you’re looking to buy or refinance a home, today you have more loan options than ever. With a wide selection of fixed-rate loans, adjustable-rate mortgages (ARMs) as well as term lengths, down payment requirements and interest rates, just about any consumer can find a mortgage that suits their budget and both their short-term and long-term financial goals. Here’s a quick rundown of seven of today’s most popular loan types with links to more information so you can choose the loan that’s best for your needs:
The 30-year mortgage has been around longer than the other six popular loan types, and it remains a popular choice for those looking for low, predictable payments spread out over time. These mortgages are available at a range of interest rates, which means they’re also available for consumers who don’t have picture-perfect credit. The locked-in monthly payments mean there are no adjustment surprises and consumers can confidently plan their monthly budgets and long-term goals. But their longer, 30-year term also means you’ll end up paying a lot in interest over the life of the loan.
Learn more –> 30-Year Fixed
The 15-year-fixed mortgage has all the stability and predictability of the 30-year fixed mortgage’s regular monthly payments, but it cuts the loan’s term in half. That means that not only will you shed the monthly burdens of mortgage payments twice as fast as you would with a 30-year mortgage, but you’ll dramatically cut the amount of interest you’ll be paying, as well. The one caveat: The monthly payments are going to be a lot higher, so you need to be sure your income can handle the extra amount each month for the next 15 years.
Learn more –> 15-Year Fixed
Especially well-suited for buyers whose circumstances are expected to change within the next five years, the 5/1 ARM offers budget-friendly low payments for the first 60 months and then adjusts annually thereafter, based on industry indexes. If you’re expecting to get a better job, get a promotion or move before the initial five-year period ends, this loan can be an excellent cost-saver. It’s also an option for homebuyers who need some breathing room in their budgets now, but feel confident they’ll be able to handle the potential hike in monthly payments in five years or be able to refinance in that time.
Learn more –> 5/1 ARM
Guaranteed by the federal government, FHA mortgages are designed to help just about anybody – even those without big savings accounts – buy a home. FHA loans require a smaller down payment than traditional fixed-rate mortgages – typically as low as 3.5%. For some purchases, buyers may even be eligible to have their home improvement costs rolled into the loan through the FHA’s 203K program, an especially attractive option for those with tight budgets willing to buy a less-than-picture-perfect property.
Learn more –> FHA Loan
If you’ve served in the military or if you’re serving now, there’s probably no better choice than a VA-backed loan. These loans require no down payment and you don’t need to be a first-time buyer to qualify. The seller can even take care of the closing costs, making the home even more affordable. To qualify, buyers will need to begin by obtaining a Certificate of Eligibility (COE) verifying their term of service and the terms of their discharge from the government.
Learn more –> VA Loan
If you want to buy a home that exceeds the limits set for conforming loans – from $417,000 to $625,000 for non-FHA loans and $729,750 for FHA mortgages – the jumbo mortgage is the mortgage you’ll need; in fact, jumbos are the only mortgages available for high-value luxury home purchases. Be prepared for higher payments and more stringent income and credit requirements to make your dream home a reality.
Learn more –> Jumbo Loan
A relatively new entry into the mortgage industry, reverse mortgages are ideal for homeowners 62 years of age or older who want to tap into their home’s existing equity to help them get some breathing room in their budgets, to pay for home repairs or modifications, or even to pay for a special vacation or other purchase. Like any other loan, there are disadvantages, too, and loans require consumers to go through free counseling to ensure they understand all the risks associated with these mortgages.
Learn more –> Reverse Mortgage