Home Loan Mortgage Choices for your Next Home

Currently, there are several home loan choices available to new and existing homeowners. It is a challenge to wade through the various home loan mortgage options to discover the one suited to your needs. The following are commonly offered mortgage loan choices:

Fixed-Rate Mortgages

• Interest rates fixed for the term of the loan
• Fixed monthly payments for the tenure of the loan
• Protection against rising interest rates
• Best home refinancing option when interest rates are low

Jumbo Loans

• Home loan amounts that are above Freddie Mac and Fannie Mae loan limits
• Known also as non-conforming loans
• Generally subject to certain interest rate pricing premium and underwriting restrictions

Adjustable Rate Mortgage (ARM)

• Has lower initial interest rate compared to a fixed-rate mortgage
• Initial rate is fixed for a preliminary period
• interest rate readjusts episodically based on market conditions, after, the fixed introductory period
• ARMs may be considered during periods of low interest rates

Interest-Only Mortgage Loans

• You have freedom to pay only interest on the home loan in monthly payments for a fixed term (normally five to seven years)
• You can pay the lump sum balance, refinance, or begin paying off the principal at the end of the interest only payments

100% Financing

• Zero down payment – complete home financing provided
• No cash required as down payment
• To get loan, credit score of 620 or higher is needed
• As homeowner, it is ideal to have 4 to 6 months of cash reserves

Conforming Loans

• Mortgage home loan amount qualified for purchase by either Fannie Mae or Freddie Mac
• Limits are reviewed annually, changed limits reflect changes in national mean price for single family homes
• Limits based upon changes in October-to-October mean home price

Conventional Loans

• Loans not guaranteed or insured by the federal government
• Requires a bigger down payment compared to guaranteed government loan
• Interest rates mostly exceed FHA and VA loans.

Second Mortgages

• Mortgages taken out after the first mortgage
• Second mortgages are secured against the same asset as the primary mortgage loan
• Mortgage home loan is based on the equity or ownership interest in the home
• Primarily used for debt consolidation, college tuition, paying off of major purchases, home improvements, and other purposes

Subprime Mortgages

• Mortgages available to consumers who can’t meet prime financing criterion
• Subprime loans are accompanied with higher than average interest rates compared to prime mortgages

Hybrid Mortgages

• Hybrid home loans are a combination of fixed rate and Adjustable Rate Mortgage loans (ARM)
• Initial term of the hybrid mortgage is fixed rate after which the loan becomes an ARM

Government Loans

• Home loan mortgages guaranteed or insured by the federal government