8 Types of Mortgage Loans: Which one is for you?
If you are getting ready to make a huge purchase like a home or commercial building, and you are applying for a mortgage loan, it is best to be as informed as possible.
There are 8 types of mortgage loans, and depending on a few factors, there may be some types that will suit you perfectly and other types that just won’t be a good fit.
Each mortgage loan has different advantages and disadvantages for the borrower, so it is important to know your options and speak with your lender about which is best for you.
The 8 types of mortgage loans
- Fixed Rate Mortgage – As the name suggests, a “fixed rate” mortgage has an interest rate that will not change for the duration of your mortgage loan.
- Interest-Only Mortgage – This mortgage requires the borrower to pay only the interest of the loan for a certain amount of time. After which the principal of the loan must be repaid in lump sums by a specified date, or in subsequent payments.
- Adjustable Rate Mortgage (ARM) – ARMs are also known as variable rate mortgages and have interest rates that may change from time to time depending on changes in the economy and financial conditions associated with the loan. In essence, your monthly payment could increase or decrease depending on these factors.
- FHA Mortgage – These mortgages are backed by the Federal Housing Administration. These loans come with built-in mortgage insurance in case the mortgagor is unable to repay the loan.
- VA Mortgage – These loans are specific for Veterans of the US Army Forces and sometimes their spouses. This mortgage is guaranteed by the Veteran Affairs and does not require a down payment.
- Jumbo Mortgage – Jumbo mortgage loans are above a certain dollar amount that is too big for the Federal Government to guarantee. This dollar limit varies from county to county.
- USDA Mortgage – These loans are guaranteed by the US Department of Agriculture and require no down payment on most properties.
- Balloon Mortgage – Similar to the Interest-Only mortgage, the Balloon mortgage requires that you pay the interest of the loan for a certain period of time, after which the total principal loan amount becomes due.
Pros and Cons of Different Mortgages
|Fixed Rate Mortgage
|Adjustable Rate Mortgage (ARM)
Get your mortgage with CVF Credit Union
At CVF Credit Union, you can get a fixed-rate mortgage, ranging from 10 years to 30 years. The beauty of a fixed-rate mortgage is that you can have predictable monthly payments, so no need to worry about interest rate fluctuations. If this sounds like just what you need, click here to apply or speak with an agent who is more than happy to address any questions you may have!