Buying a new home is usually a fun and exciting adventure, especially if it is your first home. Figuring out which type of financing to choose can be a bit scary though, unless you have researched the different types there are available.
There are many types of mortgage loans available.The most commonly used and most popular among consumers is a fixed rate loan.With this type of loan the interest rate stays the same throughout the entire term. Most of these loans are for between fifteen and thirty years in length, and being a fixed rate, allows the home owner to pay the same amount each month with no surprises.
Government loans are popular with consumers. There are several different types available for those who qualify. One type is called the FHA loan. It is designed for lower to middle income families.Down payments for an FHA loan are generally lower then those for a traditional loan. Interest rates are also usually lower. Rural development loans are available to those wishing to purchase a house that is in a designated area. As with an FHA loan, this type is for lower to middle income families. Veterans Loans are available for those that have served in the military. VA loans usually require very little down payment.
Also available but less popular, are loans such as the interest only mortgage or a balloon mortgage. An interest only mortgage works by allowing the home owner to pay only on the interest for a certain amount of time. This makes the payment much lower, but nothing is being paid on the principle, so it has its drawbacks. Once the time is up for the interest only payment plan, the owner will be required to pay a much higher payment per month, and normally are allowed less time to pay off the balance.