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Types of Loans:
There are several different types of
loans available when applying for a mortgage:
These loans can be broken down into
two types: Fixed-Rate loans and Variable-Rate loans. A
Fixed-Rate loan is generally a 15-year or 30-year loan. The
interest rate of this type of loan does not change during the
life of the loan; therefore, your principal and interest
mortgage payment will stay the same until the loan is paid off.
A Variable-Rate loan is one in which
the interest rate will change over the life of the loan period.
These types of loans are commonly referred to as Adjustable Rate
Mortgages, or ARMs.
Hybrid Loans:
These loans will generally have a fixed rate for the early life
of the loan, such as the first 3, 5, or 7 years, and then roll
over to a variable rate loan once the fixed period ends.
Government Program Loans:
These loans are insured loans through either the Federal Housing
Administration (FHA) or the Department of Veterans Affairs (VA).
A government program loan generally requires a smaller down
payment than a conventional loan. In addition, the interest
rates on these loans are commonly below the current market
rates. FHA loans have special programs for first-time home
buyers and low-income home buyers.
Bridge Loans:
This type of loan is for buyers who plan to close on their new
home before they can sell their current one. A bridge loan can
be set up to completely pay off the old home’s mortgage, or it
can be set up by adding the financial obligation of the new home
to the existing amount of debt. A bridge loan is a short-term
loan, usually one year, and includes large, prepaid interest.
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