Mortgage Loan Guides

Many individuals walk into a bank or lending company and just expect to walk away with a home loan. The problem is they do not do their homework and understand the various types of mortgage loans that are available. Do to this, home buyers may find that they have a loan that they are not happy with and may at a later date be more than they can afford to pay monthly and stay on top of the rest of their bills.

In order to ensure you know exactly what you are doing when you shop for a mortgage loan, you should first write out a list of your income and the money that you have to pay out each month. This will give you a ballpark figure on what you can afford to pay monthly for your home loan. Quite a bit of this has to do with the type of mortgage you receive.

The types of mortgage loans explained

Fixed Rate Mortgages – Fixed rate mortgages are loans in which the interest rate will remain the same during the life of the loan, no matter if you have a 20-year loan or a 30-year loan. You will always know what your mortgage payment will be each and every month without any changes unless insurance or property taxes increase.

Adjustable Rate Mortgages – Adjustable rate mortgages are loans in which often begin with a lower fixed rate but changes as the interest rate changes according to the financial index such as the US Treasury Securities Index. This type of loan can be helpful with the low beginning rate as you can purchase a more expensive home and have lower payments in the beginning of your loan. However, the loan can go up to amounts that you may not enjoy.

FHA – A FHA loan is a federal assistance mortgage loan, which is insured by the Federal Housing Administration. This type of loan helps low and moderate income families find a home loan by lowering a few of the costs that are needed to buy a home.

Fannie Mae and Freddie Mac – Both of these are similar to an FHA loan.

Veteran’s Administration Loan – a federal assistance mortgage loan for veterans and their families.

When looking for a mortgage loan, FHA, Fannie Mae, Freddie Mac, and Veterans Administration have different criteria than other loans in order to qualify. Your lending company will be able to explain the differences in the loans that are available.

The most important thing to remember is to only accept a loan that you are comfortable with and never sign the contract if you know the monthly mortgage payment will be hard for you to pay on time. There is nothing worse than losing your home to foreclosure.

By: Jules Henri

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