Types of loans
There's no one loan that works for everyone. Each type of mortgage has its pros and cons and it's up to you to decide which one is best for your situation. Below is a description of the types of loans available. Be sure to discuss your options with a loan officer. Call 866-400-7126 today.
One of the most common types of mortgage loans is a fixed-rate mortgage. As the name implies, the interest rate on these mortgages typically stays fixed for the life of the loan, and the regular monthly principal and interest payments usually do not change. Typical terms for these mortgages span 15 or 30 years.
- Your mortgage payment is not affected by interest rate increases
- Consistent monthly payments mean it's easier to budget your finances
- Low down payment programs are available
- At the time of financing, fixed-rate mortgages tend to have higher interest rates than adjustable-rate mortgages
- Your mortgage payment will not go down if interest rates decrease
Adjustable-rate mortgages (ARM)
Another option is the adjustable-rate mortgage. Instead of a fixed rate, ARM loans have rates that periodically adjust based on the type of ARM loan.
HomeAmerican Mortgage offers hybrid ARMs, which are a combination of fixed- and adjustable-rate mortgages.
A hybrid ARM has an initial period, such as 5, 7 or even 10 years, during which the interest rate does not change. After this initial period is over, the interest rate will adjust periodically with market conditions. For example, a 5/1 hybrid ARM has an initial rate for the first 5 years that does not change; after that the rate adjusts every year.
- The initial interest rate tends to be lower than that of a fixed-rate mortgage
- If you know you'll be in your home for less than the term of the mortgage, you may end up paying less than with a fixed-rate loan
- Because the interest rate and payment amount may be lower than a fixed-rate loan, it may be easier to qualify for this type of loan
- The interest rate you pay will generally drop if prevailing interest rates decrease
- If interest rates increase, then your payment will also increase
- Future interest rate increases could make your house unaffordable
Available loan options
Choosing to go with a mortgage insured or guaranteed by the government, versus a conventional loan, can affect the terms of your loan.
Federal Housing Administration insured mortgages (FHA)
The Federal Housing Administration (FHA) is a part of the United States Department of Housing and Urban Development (HUD). FHA insured loans allow you to buy a home with a down payment as low as 3.5% of the purchase price. This smaller down payment makes it easier for first-time homebuyers to save money for their down payment. A monetary gift from a family member is allowed. FHA insured loans typically are fixed-rate mortgages.
Conventional mortgages are mortgages that are not obtained under a government insured or guaranteed program, such as a program operated by the Federal Housing Administration (FHA) or the Department of Veterans Affairs (VA). Conventional loans typically require a minimum down payment of 5%.
Bond loans and rural housing loans
Bond loans and rural housing loans may be available in your area. Your loan officer will be able to tell you if the program is available in your area.
Department of Veterans Affairs guaranteed mortgages (VA)
If you are currently in the United States military, or if you have ever served in U.S. armed forces, you may be eligible to get a loan guaranteed by the Department of Veterans Affairs (VA). If you qualify, this special government benefit might be a good option for you, as it may allow you to purchase a home with little or no down payment.