Currently in the market there are three most important types of mortgage loans.
Are you in search of mortgage loan? If yes is what you have answered then it is wise for you to know the types of mortgage loans that are presently popular in the market. Most of the times, you might get confused which type of loan is suitable to you. Thus it is vital for you to all the three types of loans in brief so that you can take the right decision.
Below mentioned are the three types of loans that most of the banks and lenders lend people. Take some time out and know about them in brief so that you can be sure which one suits your requirements the most.
Fixed interest rate mortgage loan:
This is one type of mortgage loan that is very popular and most of the people prefer taking this kind of loan due to a number of benefits. As the name says, the interest rate in the mortgage loan is finding in this type. This means that you know how money you have to keep aside for paying the interest plus the principal amount for the loan. This is the main reason as well as the benefit why people prefer this kind of loan. In this type of loan, the term of the loan usually is 30 years. Thus you know much money you need to pay monthly for 30 years for the loan.
This is the type of loan is becoming more and more popular these days because of the flexibility that it offers. This kind of loan keeps all the loan options open for the borrowers. This is considered to be one of the most important benefits as well as reasons why this type of loan is becoming popular.
In case you find that the interest rates are too high, then you have an option in convertible loans. You can convert the loan into fixed interest rate mortgage loan. If you find that the interest rate is low, then you can convert the, loan into ARM based loan.
Special mortgage loan:
This is a type of mortgage loans that are offered only to a group of people. For instance, the FHA type of mortgage loan is only offered to people who are buying homes for the first time or even people having bad credit.
The above mentioned are the popular types of mortgage loans in the market. Choose the one that suits your needs and budget as well.
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Purchasing a home can be a complicated and confusing process, especially for first-time buyers. Throughout the process, first-time home buyers will encounter a variety of unfamiliar real state terms. There are several key terms associates with purchasing real estate that are helpful to learn.
For example, many buyers confuse the terms broker and salesperson. A broker is a properly licensed individual, or corporation, who serves as a special agent in the purchase and sale of real estate, a salesperson is an individual employed or associated by written agreement by the broker as an independent contractor. The salesperson facilitates the purchase or sale of real estate.
Once you decide to purchase, a salesperson will prepare a sales contract to present to the seller along with your earnest money deposit. The sales contract is the document through which the seller agrees to give possession and title of property to the buyer upon full payment of the purchase price and performance of agreed-upon conditions. The earnest money is a buyer’s partial payment, as a show of good faith, to make the contract binding. Often, the earnest money is held in an escrow account. Escrow is the process by which money is held by a disinterested party until the terms of the escrow instructions are fulfilled.
After the buyer and seller have signed the contract, the buyer must obtain a mortgage note by presenting the contract to a mortgage lender. The note is the buyer’s promise to pay the purchase price of the real estate in addition to a stated interest rate over a specified period of time. A mortgage lender places a lien on the property, or mortgage, and this secures the mortgage note.
The buyer pays interest money to the lender exchange for the use of money borrowed. Interest is usually referred to as APR or annual percentage rate. Interest is paid on the principle, the capital sum the buyer owes. Interest payments may be disguised in the form of points. Points are an up-front cost which may be paid by either the buyer or seller or both in conventional loans.
In general, there are two types of conventional loans that a buyer can obtain. A fixed rate loan has the same rate of interest for the life of the loan, usually 14 to 30 years. An adjustable rate loan or adjustable rate mortgage (ARM) provides a discounted initial rate, which changes after a set period of time. The rate can’t exceed the interest rate cap or ceiling allowed on such loans for any one adjustment period. Some ARMs have a lifetime cap on interest. The buyer makes the loan and interest payments to the lender through amortization, the systematic payment and retirement of debt over a set period of time.
Once the contract has been signed and a mortgage note obtained, the buyer and seller must legally close the real estate transaction. The closing is a meeting where the buyer, seller and their attorneys review, sign and exchange the final documents. At the closing, the buyer receives the appraisal report, an estimate of the property’s value with the appraiser’s signature, certification and sporting documents. The buyer also receives the title and the deed. The title shows evidence of the buyer’s ownership of the property while the deed legally transfers the title from the seller to the buyer. The final document the buyer receives at closing is a title insurance policy, insurance against the loss of the title if it’s found to be imperfect.
Buyers should plan on a least four to twelve weeks for a typical real estate transaction. The process is difficult and at times, intimidating. A general understanding of real estate terminology and chronology of the transaction, however, will help any real estate novice to confidently buy his or her first home.
Mortgage refinancing entails obtaining a new loan to pay off and replace an existing mortgage. There are several scenarios wherein mortgage refinancing is a good idea.
Most people apply for mortgage refinancing to pay lower interest rates, thus saving them money for the duration of the loan. In most cases however, you will have to pay lender fees and other charges that are tied in with the new loan. You will want to make sure therefore that you will actually be saving money from the new loan. It is also important to take into consideration the length of your stay in your home. Selling your home before you break even on the refinance will end up costing you more money than if you never refinanced your first mortgage.
Another common scenario is when the homeowner has an adjustable rate mortgage (ARM) and the interest rate on that mortgage “re sets” to a higher rate. If you anticipate an increase in your mortgage rates in the future, shifting to a fixed rate mortgage will allow you to avoid the higher interest rates later on. If you think rates are likely to go down in the long term, it may be smarter to refinance into a new adjustable rate mortgage.
If you are having difficulty paying your monthly mortgage costs, mortgage refinancing will not only extend the duration of the loan, but will reduce your monthly payments as well. Although this can help you get through a difficult financial period, you will end up paying more in interest over the course of the loan. And again, if you are not able to get a lower interest rate on your new mortgage loan, the time it would take to cover the cost of the upfront closing costs could be longer than you plan on staying in the home.
When you make the decision to apply for mortgage refinancing it is important to understand how much you will save each month and what the costs of refinancing will be. To estimate whether or not its worth it to refinance, simply multiply your monthly savings by the number of months you plan to stay in you home. After that, deduct the total costs of the various fees that you will incur with the new loan. If you end up with a negative number, you will lose money on the refinancing. If you go for refinancing, you will be in a better position to either break even or save money if you live in your home for a longer period of time. Mortgage refinancing is still a far better option even if the rates on the new loan are only slightly lower than what you are paying now.