Despite the dampened economy, home sales are still moving along in 2020 with only a ~3% seasonal drop heading into traditionally slow fall. That means that the idea that health concerns would lead to a housing bubble burst has been unfounded.
All of that to say, if you’re considering buying a house, you should stop waiting and start buying before inventory gets prohibitively limited.
As you move through your house buying journey, you’ll discover that there are several types of mortgages you can choose from. Understanding which one is best for your unique needs can be a challenge.
We’re here to add clarity to that issue.
Below, our team explores the most common types of home loans. Keep reading to get informed and save money.
Walk into any mortgage company and they’ll offer you a standard fixed 15/30-year mortgage.
This mortgage offer buyers a fixed interest rate that they’ll enjoy over the life of their loan. That fixed rate brings with it predictable, consistent monthly payments.
Standard fixed mortgages are among the most popular mortgages you can purchase a home with.
Adjustable-rate mortgages are helpful in certain situations. They offer buyers ultra-low interest rates, but those rates have the ability to shift over the life of a loan.
If you’re confident the economy will remain stable, you can count on your low, adjustable rate to hold steady. If you’re confident you can refinance if your rate shoots up too high, adjustable rates might also make sense
For most buyers though, adjustable-rate mortgage’s volatility makes them too risky to buy into.
The Federal Housing Administration (FHA) offers special types of mortgages that require little down payment (3.5%) and are available to a wide range of credit scores. All you have to do to apply for an FHA mortgage is to find a lender to facilitates them.
FHA mortgages do have special requirements like the need to have the property you’re financing be your primary residence. This disqualifies most real estate investors from leveraging the FHA.
When you pay your monthly mortgage payment, you pay a portion of your home’s principal cost (the price of your home divided by how many months are left on your loan) plus interest. Interest-only mortgages ask only for the interest portion of your loan and allow you to pay your principal all at once when your loan expires.
Banks only offer interest-only mortgages to people with substantial assets since they can be assured that these people can meet their lump-sum payment obligations.
Common Types of Mortgages Scratch the Surface
Our team has walked you through four types of mortgages that are worth investigating as you move to buy a house. This list is by no means exhaustive.
VA mortgages, USDA mortgages, and other less common mortgages exist that may offer you a better deal. Keep learning everything there is to know about getting a mortgage through your local bank or by exploring more of the helpful content on our blog!