Thursday, September 3, 2015 / by Matt Chase
Last week’s blog focused on PMI, or private mortgage insurance. That is if you have less than 20 percent for a down payment in order to purchase a home. Today I will focus on the other different types of mortgage loans. Although about seventy percent of homes deal with traditional mortgage loans, it is important and beneficial to at least know about the other loans out there.
First, I will discuss traditional mortgage loans. As stated above, most mortgage loans fall into this category. The most popular is a fixed rate mortgage. The reason for the popularity is that this offers stability. The interest rate stays completely constant from the very start of the loan. It stays constant throughout the term of the mortgage. This is the most popular choice of home buyers. The other type of traditional mortgage includes the adjustable rate mortgage. The interest rate for the adjustable rate mortgage is tied to an index. This means that it fluctuates according to the changing market rates. This type of loan does have less stability in comparison to the fixed rate mortgage, but the initial rate is lower. These traditional mortgage loans are typically used when dealing with the twenty percent down payment.
Secondly, I will discuss the other types of mortgage loans. These loans are classified as government guaranteed loans. There are three kinds of loans including a federal housing association loan, a VA loan, and a USDA loan. A Federal Housing Association loan can be substantially beneficial for first time home buyers. The interest rates are typically lower than the traditional mortgage rates discussed above. The VA loan is of particular interest if a potential home buyer has served in the military actively, or is the surviving spouse of an active service member. A USDA loan is typically for low to moderate income individuals. This loan is used for people purchasing a home in areas “designated for rural development.” Typically the criterion to qualify is quite relaxed. These government guaranteed loans usually are dealt with when there is a three to five percent down payment.
If you, or someone you know, is interested in selling a home, specifically in the Lorain or Cuyahoga counties, feel free to contact us at Chase Group - Keller Williams Realty, Greater Cleveland West online here or at 440-452-2000.