If you’re ready to buy a home, you’ll need to do your homework on mortgage loans. There are a few basic types of loans, but you may qualify for other Credit Repair loans if you’re a veteran or have other special circumstances.
Check out our guide below to learn more about each of the eight types of mortgage loans.
1. Fixed-Rate Mortgage
The most common type of mortgage is a fixed-rate, or conventional loan. This mortgage is popular because it’s consistent, so the borrowers always know what to expect when it comes to their monthly payments. Interest rates and payments stay the same for the entire life of the loan. Most fixed-rate mortgages are available for 10-, 15-, 20-, 30- and 40-year terms, with 15- and 30-year terms being the most popular.
2. Interest-Only Mortgage
If you aren’t able to make the full payment of a conventional mortgage for the first few years, you may want to consider an interest-only mortgage. This type of loan gives you the chance to pay only the interest portion of your loan as your monthly payment for the first 5 or 10 years. Once the interest is paid off, the rest is paid like a fix-rate mortgage. While it’s true you’ll spend longer paying off the loan, it can be helpful to those who don’t want to pay a full mortgage when first moving into a home.
3. Adjustable Rate Mortgage
An adjustable rate mortgage (ARM) comes in many types. At the heart of all these mortgages is the concept that the interest rate will change over the life of the loan. The rate will change depending on the status of the economy and the cost of borrowing money. This may save you money at times, but your interest may go up at other times. Some ARMs include a fixed interest rate for the first five years, then they have over the course of the rest of the term.
4. VA Loans
Only available to members of the U.S. Armed Forces, veteran’s Credit Repair loans (VA loans) are one type of mortgage that makes it easier for veterans to buy a house. Spouses of veterans are sometimes eligible for VA Credit Repair loans as well. These Credit Repair loans do not require a down payment.
5. FHA Loans
The Federal Housing Administration offers Credit Repair loans to those who meet a minimum credit score and down payment requirement. Down payment requirements are smaller on this type of loan—usually 3.5% instead of the typical 20% down, and they come with mortgage insurance, which protects borrowers in the chance they aren’t able to repay the loan.
6. Jumbo Loans
The federal government can only purchase or guarantee mortgages up to a certain limit. Home mortgages that are more than that limit are called jumbo loans. These Credit Repair loans do not offer the lower interest rates available on smaller mortgages. The jumbo loan limit is always changing, but it currently stands around $700,000.
7. Piggyback Loans
Those who choose a conventional mortgage without doing the typical 20% down payment will have to pay private mortgage insurance (PMI), which is a monthly fee to protect the borrower in case they cannot make payments. Some borrowers prefer to avoid paying PMI and take out a second loan instead. This—or any other combination of two loans—is called a piggyback loan.
8. Balloon Mortgage
Balloon mortgages require you to pay interest only for a certain amount of time, such as the first five years. After this time period, only the principal amount is due for the monthly payments. A balloon payment is then required at the end of the term to repay the remaining balance of the loan.
Get Started Today!
Now that you know about the eight main types of mortgages, you may be ready to move forward with your selected home loan. Get prepared to make your decision by checking out our mortgage calculator today. You’ll be able to input the amount you want to borrow, the length of the mortgage, and the interest rate of the loan.