Fixed Rate Loans
A 30, 20, 15 year fixed
conventional loans are loans that have the same mortgage payments for 360
months. Conventional loans typically are harder to qualify for than FHA loans
and require a slightly higher down payment. However, in some cases rates can be
lower and have lower closing costs. Also, monthly mortgage insurance is usually
less or can be nothing with 20% down payment.
This type of loan has monthly
payments that are based on a 30 year repayment schedule and the interest rate
remains fixed for the first three years. After that time the interest rate
(monthly payments) may change year after. This is called the adjustment period.
The new rate is based upon changes in a financial index and is calculated by
adding a specified amount to the index.
A VA loan is perhaps the most
powerful and flexible lending option on the market today. Rather than issue
loans, the VA instead pledges to repay about a quarter of every loan it
guarantees in the unlikely event the borrower defaults. That guarantee gives
VA-approved lenders greater protection when lending to military borrowers and
often leads to highly competitive rates and terms for qualified veterans.
An FHA (Federal Housing
Administration) loan is a loan insured against default by the FHA. In other
words, the FHA guarantees that a lender won’t have to write off a loan if the
borrower defaults – the FHA will pay. FHA loans are not for everybody.
Nevertheless, they are a great help to some borrowers. FHA loans allow people
to buy a home with a down payment as small as 3.5%. Other loans might not allow
such a low down payment.