No matter which lender you contact, you are likely to find these mortgage types, which have become quite popular with borrowers who want to buy a first home or an investment property.
Most of these loans are fully amortized, which means your payments are first applied to the interest and then to the principal, reducing the principal balance gradually to zero.
Though brick-and-mortar lenders continue to exist, online lenders have come in a big way, making Internet mortgages a popular commodity these days.
What questions you should ask a lender while shopping for a mortgage?
Fixed-Rate Mortgage
A fixed-rate mortgage is probably the most popular type as it offers the security of fixed payments throughout the life of the loan. This is because the interest rate and other terms do not change. This mortgage option is good for borrowers with regular incomes. However, the interest rate is usually higher than the average.
Adjustable-Rate Mortgage
Your payments will vary with an adjustable-rate mortgage (ARM), which is also known as a variable-rate mortgage (VRM). This is because the interest rate is linked to an index rate, which is variable in nature. The advantage with this mortgage type is that your payment will be lower in the initial few years. This loan option is ideal for borrowers who have just begun to earn and can expect improvement in income in the years to come.
Construction Loan
A construction loan is a short-term loan, which is provided to finance the cost of building a new home. The lender pays the builder in stages as the building gets completed.
Jumbo Loan
A jumbo loan is an example of a non-conforming loan, which is defined as a loan that doesn’t meet the underwriting guidelines of Fannie Mae and Freddie Mac. Among the most important guidelines is the loan limit that is currently below $417,000 for a conforming loan. A jumbo loan typically has a higher interest rate and additional fees charged by a lender.
What is the difference between a conforming loan and a non-conforming loan?
Interest-only mortgage
It is a special mortgage that allows you to pay only interest for the initial few years. Note that as long as you keep paying only interest, your principal balance remains unchanged. An interest-only mortgage can be a good option if your present income is low but you can expect a growth in your income.
What are some of the mortgage types with flexible payment options?
FHA Loans
FHA Loans are insured by Federal Housing Administration, the world’s largest insurer of mortgages. If you are low on down payment, an FHA loan might be an ideal option for you.
What are some popular FHA loan programs?
Bridge Loan
Also known as a swing loan, a bridge loan helps a homeowner to buy a new home while the old home is awaiting the closing date. Called appropriately, a bridge loan, thus, bridges the period between the closing date of a home purchase and the closing date of a home sale. While an unsecured bridge loan is available only when the borrower has a firm contract to sell the existing house, a secured bridge loan can be had without such a contract.