A mortgage loan is defined as a type of loan which uses real property as
collateral for the lender. A few decades ago, there were only 3 main types of
mortgages that were accessible to home buyers and investors. A fixed-rate
mortgage, a VA loan, and an FHA loan were the only three options available.
Times have certainly changed over the years. The sheer number of mortgages
available today is simply overwhelming to say the least.
The need to own
property has propelled the creation of different 住宅ローン flavors to suit the different
needs and demographics of potential home buyers. The exponential growth of home
mortgage loans could also be attributed to the cut throat competition in the
lending industry. The need to outsmart each other and attract as many consumers
as one could has
spurred the growth of more mortgage loan types which
are customized to the basic needs of consumers. Some of the basic types of
mortgages in the marketplace include Fixed-rate mortgages – these are the oldest
of all types of home mortgages. Otherwise referred to as conventional loans,
fixed rate home mortgages are still the leading of all types of loans in the
lending industry today. Note however that they are mostly awarded to consumers
who have the best credit and unquestionable credit history. Generally, under
this type of mortgage, the interest and principal remains the same throughout
the loan tenure.
FHA Mortgage Loans – the second category of basic home
mortgages is the government secured FHA home loans. This category is funded by
the government with mortgage insurance. It is often a very attractive option to
first-time home buyers since the down payment requirements and other qualifying
requirements such as the FICO scores are very minimal.
VA Loans – this
is another government insured home loan that is available to veterans who have
worked in the U.S. Armed Services, or sometimes to the spouses or immediate
dependants of a deceased veteran. The qualification for VA loans would vary a
great deal depending on several factors such as the duration spend in service,
the actual period of service, and whether the release from service was honorable
or not. The most attractive feature of this type of loan is the fact that no
down payment would need to be raised to qualify for the loan. The reason for
this is because the loan is always secured by the Department of Veteran Affairs,
but financed by a conventional lender.
Adjustable rate mortgages – this
is considered the opposite of the fixed rate traditional mortgage in the sense
that the mortgage rate often changes after a set period of time, mostly after
the first 10 years of fixed monthly payments. It is becoming a popular choice
because of its attractive low monthly payments. Those with good credit are
always guaranteed of better terms and attractive rates.
Interest-only
mortgage loans – as the name may suggest, this is a type of loan where the
borrower pays the interest only on the monthly payments for a set period of
time, mostly a period of 5-7 years, after which the home buyer would be faced
with the option of paying off the lump sum balance, opting to refinance, or face
what could be a considerably exorbitant monthly payment.
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