You can’t be too careful when it comes to selecting the type of mortgage insurance that will bring you the best value. Situations such as these call for research and an understanding of the types of mortgage products that are available. Some of the most common types of mortgages include –
Adjustable Rate Mortgages
ARMs (or Adjustable Rate Mortgages) may lower your initial monthly payments since they start with lower interest rates. Unlike Fixed Rate mortgages, the interest from your Adjustable Rate Mortgage will fluctuate on a periodic basis. How much it changes will depend on the state of interest rates in the financial market. For example, your monthly payments will increase if the interest rates are up.
Also known as Variable Rate mortgage, an ARM can prove to be a good choice for potential home owners provided that they know the risks involved. You do not want to end up with an ARM that is not suited to your particular situation or mortgage requirements.
Fixed Rate Mortgages
Fixed Rate Mortgages are one of the most common types of mortgage products that people go for and it is easy to see why. This particular mortgage product ensures that your interest rate never changes. In addition, the interest payment and monthly principle remains constant for the entire term of the loan.
In addition, a Fixed Rate mortgage also allows you to predict your monthly housing costs more efficiently no matter whether you opt for a 20, 15 or 30 year loan. In fact, most borrowers choose this particular option since potential decreases in interest rates will not affect them. In case such a thing does happen, a homeowner can easily decide whether refinancing his mortgage is a good idea or get a better interest rate. Fixed Rate Mortgages are also favored by certain government programs such as the VA and FHA.
FHA Loans
Speaking of government programs, you can also acquire a housing loan from the FHA (Federal Housing Administration). The FHA is a part of the HUD (Housing and Urban Development) and can insure home loans that may include lower down payments.
RHS Loans
RHS (Rural Housing Service) loans are designed to make it convenient for low income individuals to afford homes in rural areas. The funds that are acquired from the loan can also be used by borrowers to renovate, repair or to purchase sites.
VA Loans
As the name implies, the purpose of VA (Veterans Affairs) loans is to make housing affordable for eligible US veterans. Another major benefit of VA home loans is that they do not require any PMI (Private Mortgage Insurance). In fact, the loan also prohibits lenders from requiring PMIs. In addition, VA loans do not necessitate down payments either.
A home is the single most important asset you will ever invest in. Needless to say, planning for the investment might seem like a daunting task at first. However, once you choose the right type of mortgage product for your situation you won’t have a problem acquiring a home for you and your family.