Exploring Your Mortgage Loan Options

Purchasing a home is a very exciting time in anyone’s life, but it can also be a confusing process. This is particularly true when it comes to exploring mortgage loan options. Prior to searching for a home, many people do not realize that there are many different types of mortgage loans available to select from. Therefore, whether interested in Bethesda condos or a home in Ulster County, you should take some time to learn more about the mortgage loan options you can choose from.

Fixed-Rate Mortgage

The most common type of mortgage loan taken out by homebuyers is the fixed-rate mortgage. As the name implies, fixed-rate mortgages are those that maintain the same interest rate throughout the duration of the loan. Typically, fixed-rate mortgage loans are in place for 10, 15, 20, 30, 40 or even 50 years.

Adjustable-Rate Mortgage

Adjustable-rate mortgages, or ARMs, are those with interest rates that change over time. When and how the interest rate changes depends upon the exact type of loan taken out. While the interest rate of some ARMs may change on a monthly basis, others may change once per year. Yet others remain fixed for the first several years before they begin changing on a regular basis.

Interest-Only Mortgage

With interest-only loans, the borrower pays toward only the interest for a certain period of time. After this predetermined amount of time has passed, the borrower is required to pay off the balance of the original loan balance.

Combo/Piggyback Mortgage

A combo/piggyback mortgage is one that involve taking out two loans. These loans may both be fixed-rate or adjustable-rate, or they may be a combination of the two. This type of loan is most commonly selected by those who do not have 20% to apply toward a down payment. By taking out one loan to pay the down payment, the borrower can successfully avoid paying private mortgage insurance.

FHA Loans

FHA loans provide another option for those who do not have enough money to make a 20% down payment. FHA loans, which are insured by the government, are offered to first-time homebuyers who do not have the funds necessary for a conventional loan. Not only are the down payment requirements reduced, but credit scores are not an issue when taking out an FHA loan.

VA Loan

Another government loan option is available through the Department of Veteran Affairs. While the VA loan is only available to those who have served in the U.S. Armed Forces, it is a guaranteed loan that does not require a large down payment.

About The Author – Kevin Koitz is a Bethesda real estate specialist and a Maryland Realtor with The Koitz Group.

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