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Home Mortgage Types

 

When searching for a home mortgage, it is helpful to know the types of mortgages available. Additionally, should a home owner be facing foreclosure, there may be some ways to avoid the foreclosure by switching the type of mortgage held.

Most Popular Home Mortgage Types
  • Fixed Rate Loans
  • FHA Loans
  • VA Loans
  • Interest Only Loans
Fixed Rate Mortgage Loan

With this type of loan, the mortgage interest rate is at a fixed rate for the life of the loan. The length of the loan can vary from 10, 15, 20, 30, 40, or even 50 years.

FHA Loans

This type of loan is ideal for first time homeowners and is backed by the government.

VA Loans

This type of loan is available to veterans of the Unites States armed services. One of the benefits of this type of loan is that a down payment is not required.

Interest Only Loans

The title of this type of loan is misleading because the interest only portion is only for a limited and specific period of time. After that time, regular payments must be made on the principal or a balloon payment is required. This type of loan has caused issues for many homeowners as they are not prepared once the higher payments become due.

Other Loan Types
  • ARM Mortgage Type
  • Combo/Piggyback Mortgage Loans
ARM Mortgage

This is an Adjustable Rate Mortgage. Basically the interest rate on an ARM goes up and down depending on several factors and can change monthly, quarterly, or yearly depending on the type of mortgage signed.

Combo/Piggyback Mortgage

The combo package is a loan combining a first and second mortgage. This occurs when the borrower takes out the two loans to avoid private mortgage insurance when the down payment is less than 20%.

When you choose a mortgage type, are you stuck with it for the life of the loan? The answer is no. Often home owners can refinance into a different mortgage rate. This can be especially helpful for someone facing foreclosure on an interest only loan that now has the principal payments due.

If you are in a foreclosure situation, it is important to speak with a foreclosure attorney who specializes in real estate law before making any hasty decisions.

Mortgage loan type deciding factors:
  • Down payment availability
  • Mortgage interest rates
  • How long you plan to stay in the property
Of course there are other deciding factors; however, these are some of the top factors when deciding what kind of loan to get. Experts say that an “Interest Only Loan” can be a good thing for a first time homeowner as they get used to having to make house payments that tend to be a little bit more expensive than rent. It also gives them the opportunity to prepare for the regular expenses that come with owning a home that perhaps weren’t considered when renting.

Homeowner Expenses:
  • Homeowners insurance
  • Private mortgage insurance (if down payment is less than 20%)
  • Garbage, water, sewer
  • Yard service
  • Repairs
  • Possible pest control
The downfall with an interest only loan is if/when the larger payments are due, the homeowner can’t afford them and they are put at risk of foreclosure. If that is the case, the homeowner should contact the bank immediately to see if a home loan modification can be made so the homeowner can keep their residence.

There are a few more risky home mortgage choices that potential buyers can investigate. Homeowners facing foreclosure can also investigate these just in case they may offer relief from their situation.

Riskier Home Mortgage Options:
  • Bridge/Swing Loan
  • Equity Mortgage
  • Reverse Mortgage
Regardless of the type of loan you require, it is best to consult with an experienced  attorney and/or financial advisor prior to deciding what course of action to take. This is especially important if you are facing bank foreclosure on your current property.

 Real estate law is complicated and can vary from state to state. It is important to speak with a real estate attorney who specializes in real estate law before making any hasty decisions.
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