Types Of Mortgages

Understand The Different Types Of Mortgages Before Buying A Home

There might be fewer types of mortgage loans than there were a decade ago, but that's a good thing. Moreover, there are still likely more options than you might think. There is what's available, and then there is what's popular. As you can imagine the ARM loan has become much less popular, but it's still around. If you don't know what an ARM loan is, well that's why you're ready to read about the different types of mortgages and to get compare mortgages. 

Let's start with the ARM loan since the cat is out of the bag. This isn't your traditional mortgage loan. The unconventional terms of an ARM loan can be advantageous for certain homeowners in particular situations. Of course, you can kind of feel like you're rolling the dice. When you want an ARM loan, it's not just about your situation but about the market for interest rates in general. You have no guarantee that the interest rate for your ARM loan isn't going to be on the rise after a specified amount of time. 

Of course, an ARM loan can of course be refinanced. However, refinancing a loan has to make financial sense, and it's not like you're deciding which doughnut to buy at the coffee shop. You still have to watch yourself and familiarize yourself with all terms involved with a mortgage loan. A good piece of advice is to make sure you can handle a loan if the worst case scenario plays out. That always ends up scaring people away from ARM loans, which by the way stand for adjustable rate mortgages. 

Now, the most popular option is going to of course be the traditional mortgage loan, otherwise known as a conventional mortgage loan or fixed rate mortgage. You get a guaranteed fixed interest rate, but that doesn't mean you're free and clear. This is a big purchase, and you need the right interest rate. Additionally, you need to be sure that you are comfortable with the rest of the terms. 

With a fixed rate, you might not think you have many other terms to consider. However, you have to think about how many years you're going to be paying back that loan, right? Look at the difference in the interest you'll pay when it comes to a 15 year fixed rate mortgage and a 30 year fixed rate mortgage. Of course, you have o get into the home loan vehicle that you can afford. Still, looking at that kind of information ahead of time can help you decide exactly just that, how much house you can afford. 

There are still interest rate only loans. Don't ask me why. You'll find variations when it comes to ARM loans, too. There are also mortgages that come with balloon payments and two step mortgages as well. While many of the niche type mortgages can fit certain people's financial situations, most experts are going to suggest the shortest term fixed rate mortgage that you can find. You want to be comfortable for the duration of the loan, without any surprises.