Different Mortgages

Posted by  on Apr 01, 2010

In order to understand the mortgage industry and be an informed consumer, it is easiest to start out with the basic types of mortgages. All mortgage plans can be divided into categories in two different ways. Firstly, mortgages can be divided into conventional and government loans. Secondly, all the various mortgage programs are classified as fixed rate loans, adjustable rate loans and their combinations.

Many states, counties and cities provide low to moderate housing finance programs, down payment assistance programs, or programs tailored specifically for a first time buyer. These programs are typically more lenient on the qualification guidelines and often designed with lower upfront fees. There are loan assistance programs offered at the local or state level such as Mortgage Credit Certificate, which allows you a tax credit for part of your interest payment. Most of these programs are fixed rate mortgages and have interest rates lower than the current market.

Because home loans and mortgages are lifelong matters, it is important to have some rudimentary understanding of how they operate. Interest rates, in respect to mortgage type, are a crucial consideration when considering a home loan or refinancing and they vary widely. When shopping for a home loan company or mortgage broker it is necessary to compare their rates and interest rates at the time. A good mortgage broker will be able to service a borrower with their lifelong obligations and offer assistance in future options of refinancing or a possible second mortgage. Mortgages and home loans are seemingly simple however, there are several varieties of each and a few important variables, like interest rates.

Conventional loans are simply those with no special subsidies or requirements. For example, loans may be acquired through the Federal Housing Administration, United States Department of Veterans Affairs or United States Department of Agriculture. These three institutions provide special home loans with specific requirements, respectively.

The Federal Housing Administration (FHA), which is part of the U.S. Dept. of Housing and Urban Development (HUD), administers various mortgage loan programs. FHA loans have lower down payment requirements and are easier to qualify than conventional loans. FHA loans cannot exceed the statutory limit. Go to FHA Programs page to get more information.
VA loans are guaranteed by U.S. Dept. of Veterans Affairs. The guaranty allows veterans and service persons to obtain home loans with favorable loan terms, usually without a down payment. In addition, it is easier to qualify for a VA loan than a conventional loan. Lenders generally limit the maximum VA loan to $203,000. The U.S. Department of Veterans Affairs does not make loans, it guarantees loans made by lenders. VA determines your eligibility and, if you are qualified, VA will issue you a certificate of eligibility to be used in applying for a VA loan.

A VA guaranteed loan is made by a private lender Example’s are: Banks, savings and loans, or mortgage companies. These loans are made to eligible veterans for the purchase of a home, which will be for their own occupancy. The VA does not lend the money or service the loan. The Veterans Administration guarantees a portion of the loan to the lender.


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