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Types of Loans & Loan Programs

Types of Loans & Loan Programs 2017-01-11T18:39:29+00:00

Loan Programs

Conventional Mortgage
A conventional loan generally refers to a mortgage loan that follows the guidelines of government sponsored enterprises (GSE’s) like Fannie Mae or Freddie Mac.  Most mortgages are conventional mortgages. Conventional mortgages can be fixed-rate or adjustable rate mortgages and typically have terms of 15 or 30 years.  Conventional mortgages can be conforming or non-conforming. Conventional mortgage loans are ideal for borrowers with excellent credit who can afford a down payment of 5% or more.

FHA Mortgages
FHA mortgage loans are very competitive loan programs. FHA mortgages allow the homebuyer to put down as low as a 3.5% down payment AND have less than perfect credit.  Because the Federal Housing Authority insures your mortgage, Inlanta Mortgage may be more willing to give you loan terms that make it easier for you to qualify.

USDA Rural Development Mortgage
USDA home loan programs are primarily designed to help lower income individuals or households purchase homes in rural areas. USDA Rural Development funds can be used to build, repair, renovate or relocate a home, or to purchase and prepare sites, including providing water and sewage facilities.

VA Mortgage
A VA mortgage loan is a federally guaranteed mortgage loan for veterans that does not require a down payment or private mortgage insurance. This is an excellent benefit for eligible veterans. Private mortgage insurance is usually required if a down payment of 20% is not provided – with the VA mortgage loan both the down payment and private mortgage insurance requirements are waived for veterans.

Loan Types

Thirty-Year Fixed Rate Mortgage
The traditional 30-year fixed-rate mortgage has a constant interest rate and monthly payments that never change. This may be a good choice if you plan to stay in your home for seven years or longer. If you plan to move within seven years, then adjustable-rate loans are usually cheaper. As a rule of thumb, it may be harder to qualify for fixed-rate loans than for adjustable rate loans. When interest rates are low, fixed-rate loans are generally not that much more expensive than adjustable-rate mortgages and may be a better deal in the long run, because you can lock in the rate for the life of your loan.

Fifteen-Year Fixed Rate Mortgage
This loan is fully amortized over a 15-year period and features constant monthly payments. It offers all the advantages of the 30-year loan, plus a lower interest rate—and you’ll own your home twice as fast. The disadvantage is that, with a 15-year loan, you commit to a higher monthly payment. Many borrowers opt for a 30-year fixed-rate loan and voluntarily make larger payments that will pay off their loan in 15 years. This approach is often safer than committing to a higher monthly payment, since the difference in interest rates isn’t that great.

Hybrid ARM (3/1 ARM, 5/1 ARM, 7/1 ARM)
These increasingly popular ARMS—also called 3/1, 5/1 or 7/1—can offer the best of both worlds: lower interest rates (like ARMs) and a fixed payment for a longer period of time than most adjustable rate loans. For example, a “5/1 loan” has a fixed monthly payment and interest for the first five years and then turns into a traditional adjustable-rate loan, based on then-current rates for the remaining 25 years. It’s a good choice for people who expect to move (or refinance) before or shortly after the adjustment occurs.

Adjustable Rate Mortgages (ARM)
When it comes to ARMs there’s a basic rule to remember…the longer you ask the lender to charge you a specific rate, the more expensive the loan.

2/1 Buy Down Mortgage
The 2/1 Buy-Down Mortgage allows the borrower to qualify at below market rates so they can borrow more. The initial starting interest rate increases by 1% at the end of the first year and adjusts again by another 1% at the end of the second year. It then remains at a fixed interest rate for the remainder of the loan term. Borrowers often refinance at the end of the second year to obtain the best long-term rates. However, keeping the loan in place even for three full years or more will keep their average interest rate in line with the original market conditions.

Annual ARM
This loan has a rate that is recalculated once a year.

Monthly ARM
With this loan, the interest rate is recalculated every month. Compared to other options, the rate is usually lower on this ARM because the lender is only committing to a rate for a month at a time, so his vulnerability is significantly reduced.

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