Home Loan Mortgage Choices for your Next Home
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Written by Gaurav Bhola, MSM on August 26, 2008

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

