Information About Different Types of Home Loans
The better understanding you have of the different types of home loans, the better your chances are of avoiding a bad situation regarding the financing of your home. There are some mortgage loans that have favorable terms and others that seem like a good deal for a short period of time but then later turn out to be an undue burden on the homeowner.
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Adjustable Rate Mortgage Loans
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When you close on an adjustable rate mortgage loan, (ARM) you are agreeing to pay a fixed rate for a short period of time, usually three to five years. Thereafter you will be an adjustable rate that could go up or down depending on how the financial markets move.
Fixed Rate Home Loans
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With a fixed rate home loan you keep the same mortgage rate that you were locked into for the life of the loan.
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Balloon Mortgage Loans
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With a balloon mortgage, you send your lender a lower monthly payment each month for a set number of years, but at the end of the mortgage loan you will be responsible for paying a large lump sum out of pocket to finish the loan. If you can't make this payment you risk losing your home unless you can refinance.
Jumbo Loans
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Jumbo loans are large home loans that exceed a certain amount. The minimum amount for a jumbo loan can change from time to time, but usually hovers around the $417,000 mark. It can also be $625,000 for some states and U.S. territories.
Low or No Documentation Home Loans
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With a no documentation loan, you don't have to show proof of income and assets in order to be granted a loan. Low documentation loans require a minimal amount of paperwork and come with a slightly lower interest rate.
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