When seeking a mortgage solution, it is paramount that you understand the various types of home loans available on the market. The understanding of the different home loans ensures that you are adequately knowledgeable when it comes to choosing the best home acquisition financing solution that meets your needs.
Adjustable rate Vs. Fixed Rate Mortgage Loans
Home buyers will be faced with the question of whether to go for a fixed rate mortgage loan or to go for an adjustable rate mortgage loan. When they opt for the first option, their monthly payment rates remain the same for the entire period of loan repayment, regardless of its length.
As for those that opt for a variable rate loan, they can expect their monthly rates to vary from time to time, especially on a yearly basis. However, there are hybrid adjustable-rate mortgage (ARM) loans that you can also opt for. The loan repayment rates for these types of loans begin with fixed monthly repayments which last for a given period. After the fixed compensation rate period elapses, the loan repayment reverts to adjustable repayments.
Conventional Loans Vs. Government-Insured Loans
After determining the best types of mortgage loans to go for, the next bit is to decide whether to go for a conventional loan or to go for a government-insured 203k loan. In simple terms, conventional loans are loans that are not insured by the federal government in any way.
On the end of the spectrum, government insured loans are loans that are insured by the federal government. These include the United States Department of Agriculture loans program for people living in rural areas, the U.S. Department of Veterans Affairs loans program for veterans, and the Department of Housing and Urban Development’s Federal Housing Administration mortgage insurance program.