Type of Loans – Shopping for a mortgage is a critical step in the homebuying journey there are plenty of options to explore, whether you’re buying your first home, your dream home or something in between. The following article will break down the types of home loans you may come across to help make the right choice for your needs and lifestyle.
What Is a Fixed-Rate Mortgage?
Fixed-Rate Loans – The term “fixed-rate mortgage” refers to a home loan that has a fixed interest rate for the entire term of the loan. This means that the mortgage carries a constant interest rate from beginning to end. Fixed-rate mortgages are popular products for consumers who want to know how much they’ll pay every month.
What Is a Federal Housing Administration Loan?
A Federal Housing Administration (FHA) loan is a home mortgage that is insured by the government and issued by a bank or other lender that is approved by the agency.
FHA loans require a lower minimum down payment than many conventional loans, and applicants may have lower credit scores than is usually required.
What Is an Adjustable-Rate Mortgage (ARM)?
The term adjustable-rate mortgage (ARM) refers to a home loan with a variable interest rate. With an ARM, the initial interest rate is fixed for a period of time. After that, the interest rate applied on the outstanding balance resets periodically, at yearly or even monthly intervals.
What Is a VA Loan?
A VA loan is a mortgage loan available through a program established by the U.S. Department of Veterans Affairs (VA) (previously the Veterans Administration). With VA loans, veterans, service members, and their surviving spouses can purchase homes with little to no down payment and no private mortgage insurance and generally get a competitive interest rate.