Understand Mortgages Before You Commit To One
Mortgages are a huge, long term investment that can either be a dream come true or a nightmare. Borrowers need to be aware of the large variety of mortgage options on the market today. These loans can be between the lender and the borrowers or they can be guaranteed by the government. Consider all the options before applying for a loan.
Making up 70% of the mortgage market is the standard mortgage; this loan is characterized by a fixed interest rate, unchanging payment amount and a set term of the loan. The most common term lengths are 15 and 30 years. Payment schedules can vary based on credit from every other week to every other month. However most banks ask for a monthly payment.
Government guaranteed loans come in three types; FHA, VA and USDA loans. FHA (federal housing administration)loans are set up to assist first time homeowners with lower incomes. Because these loans are guaranteed by the government they are easier to qualify for than a standard mortgage is. These homes also allow for a lower down payment then a traditional mortgage. There is one strict rule for an FHA loan, the home must be owner occupied.
If either the borrower or the borrower’s spouse have served their country in the military they may qualify for a VA mortgage. These loans require the borrowers to sow an ability to pay the loan, but offer little to no down payment. Interest rates on these loans are dependent on credit worthiness and typically follow the terms of a standard mortgage.
The final type of government guaranteed housing is the USDA Rural Development Guaranteed Housing Loan. These loans are available to those with low to moderate income that are purchasing homes in an area determined to be to be eligible. No down payment is needed for the loan and it is extremely easy to qualify for. This loan also accepts less than perfect credit.
If a government loan is not right for you there are several other option to meet your financing needs. Optional ARMs, also refereed to as flexible payment ARMs, have a rate that adjusts every month with no increase caps. Th benefit of this loan is very low initial payments. However borrows must be aware that the payments can become very high quickly.
A balloon mortgage is an option for borrowers that believe they can either refinance or payoff the loan in a short amount of time. The loan begins with standard, fixed payments for a set period of time. At the end of that time borrowers must either payoff the balance in one lump sum or refinance the mortgage elsewhere.
The final loan is known as an interest only loan. This means borrowers only pay the interest accrued on the loan for a set period of time. It offers buyers a very low payment until the principle is added in. Because the principle is paid back over a shorter period of time payments on the principle are much higher then that of a standard mortgage. Borrowers need to be sure they can handle such a dramatic increase in payments.
With the large variety of mortgages on the markets it is vital that borrowers explore all their options. The right loan can be both beneficial to the bank and the borrower if considerations like length of term, payment fluctuations and interest rate are examined closely. Enjoy your new home!
Shopping for mortgages Ajax? With our highly trained and experienced staff, we can help you find the mortgage you need at the best available mortgage rate. Visit the Oshawa mortgage brokers today.
