Type Mortgage Loan
There are many more types of mortgage loans than there were 20 years ago. Days have changed when loan had just one meaning and today there are several types of loans available. Understanding the difference among these various types is very important to understand the financial sector. However, the many different types of loans can be categorized into three main types in the end.
The fixed rate mortgage loans will have a fixed interest rate through out the loan period. These loans lock in the interest rate which is not subject to change due to inflation or deflation or market trends. You will pay the same interest rate no matter what. This could be an advantage or disadvantage depending on the market conditions.
The FHA loans are the ones that are insured by the federal government. First time home buyers should ideally choose this type of loans. However, there are minimum requirements for the down payment that need to be fulfilled. The good news is that credit rating is not given all that importance. However, it is pretty difficult to get such loans.
VA loans are another type of mortgage loans that is available for veterans and their families. They should have served the United States Army, Navy or Air Force. These types of loans carry a low interest rate on them.
Some loans are interest only mortgages, and these could be quite vague. Borrowers make the interest as the only payment and they can clear the principle amount any time. Also, this type of loan would be available for a fixed period of time.
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