Types of Mortgages

There are many different types of mortgages. It’s important to find the mortgage that’s right for you. The mortgage type, rate and length as well as points are all factors in deciding which mortgage is right for you.

Shop around. Mortgages and rates vary. Keep in mind that interest rates change frequently, even daily, so contact several mortgage lenders on the same day to comparison shop.

Some of the mortgages available today include:

Fixed-Rate Mortgage: A mortgage whose interest rate and monthly payment does not change during the entire term of the loan.

Adjustable-Rate Mortgage (ARM): Also known as a variable-rate loan, usually offers a lower initial rate than fixed-rate loans. The interest rate can change at specified time periods based on changes in an interest rate index that reflects current finance market conditions, such as the LIBOR index or the Treasury index. The ARM promissory note states maximum and minimum rates. When the interest rate on an ARM increases, the monthly payments will increase and when the interest rate on an ARM decreases, the monthly payments will be lower.

Balloon/Reset Mortgage: A mortgage with monthly payments based on a 30-year amortization schedule and the unpaid principal balance due in a lump sum payment at the end of a specific period (usually 5 or 7 years) earlier than 30 years. The mortgage contains an option to reset the interest rate to the current market rate and to extend the maturity date provided certain conditions are satisfied.

Federal Housing Administration (FHA) Insured: An FHA loan has some advantages over conventional loans. Since FHA loans are insured by the government, they generally have more lenient qualification requirements and lower down-payment requirements. The maximum loan amount for an FHA loan (single-family) ranges depending on the county where you live. You can contact a mortgage specialist for these maximum amounts for your specific county.

Veterans Administration (VA) Guaranteed: A VA loan carries many of the same advantages as an FHA home loan. However, to qualify for this loan, you must be a qualifying veteran, the unmarried widow of a veteran, a Public Health Service Officer, or an active-duty serviceman. A VA loan requires no or low down payment. Veterans should check with VA for eligibility requirements and for other assistance related to housing.