Types of Mortgages Buyers Can Choose From

by Dara Lewis 05/26/2019

There are different kinds of mortgages available to prospective homeowners today. The right mortgage for you will depend on a number of factors, including your level of income and credit rating. While there are numerous mortgage products available to buyers today, they will mostly fall under the categories below:

FHA-Backed loans

Most folks getting a home for the first time will purchase it with the help of a Federal Housing Administration loan. Introduced back in the 1930s after the Great Depression, these loans are insured by the government and hence come with attractively low-interest rates. Since the government backs them, even folks with a bad credit score can confidently apply for FHA loans. If you can't raise all of the down payment the seller is asking for, an FHA loan is ideal. 

VA loans

This kind of loan was established by the US Department of Veteran Affairs to enable former members of the nation’s armed forces to buy homes. You can also access this type of mortgage if you’re the spouse of a deceased veteran. Those who fit under this category can get a mortgage even without a down payment. 

Fixed-rate mortgage

If you want to buy a house to stay in for the long haul, a fixed-rate mortgage is a good idea. With this type of loan, the interest rate will remain fixed for the duration of the mortgage. If economists are projecting a rise in interest rates, you can cushion yourself from higher repayments with a fixed-rate mortgage. The predictability of this type of mortgage is ideal for planning since the payment consistency makes it easy to budget your paycheck. While this protects you if the interest index rises, you won’t benefit if there is a fall in the interest index. 

Adjustable rate mortgage

If you’re confident that interest rates will decline soon, this kind of mortgage will help you take advantage of that trend. Should the interest rate dip, you can expect your monthly repayments to reduce accordingly. 

Despite the name, the interest on the mortgage is usually not flexible for the duration of the loan. The loan starts with a period of fixed interest followed by a period where it becomes adjustable. Such an arrangement will work well for you if you intend to sell the house before the end of that initial period.

Find out the kind of loan you qualify for and see if you can push for better terms. Not sure where to apply? Ask your real estate agent about their recommended lenders.

About the Author
Author

Dara Lewis

Dara Lewis re-joined the housing industry in 2015 after two years of living in the Caribbean. Her previous experience includes over 12 years in the multi-family housing industry within North Carolina, Ohio, Kentucky, and Indiana-managing, and leasing apartment communities for REIT's, as well as individual owners/investors. Now a licensed realtor in Maryland, Dara obtained her ABR (Accredited Buyer Representative) and NAR green professional designations in 2016, and has been a member of WOMEN'S COUNCIL OF REALTORS since 2015. At the beginning of 2018, Dara is proud to have successfully achieved membership into the Real Estate Million Dollar Association (REMDA). Dara is an active member of Trinity Church in Towson, is the volunteer coordinator of the Towson High School Sports Boosters Bull Roast and enjoys assisting the Towson High School Music Boosters whenever possible. Dara is a graduate of Shenandoah University in Winchester, VA, and enjoys traveling around the world, as well as watching her sons play soccer from the sidelines. Dara is ready and excited to help you with all your real estate needs. Read More Specialties and Designations Works With First Time Home Buyers, Country Homes, Resale Residential, Suburban Living, Urban Living, Single Family Homes and Townhomes ABR Cities Served Baltimore, Bel Air, Cockeysville, Cockeysville Hunt Valley, Forest Hill, Glen Arm, Hereford, Loch Raven, Lutherville, Lutherville Timonium, Monkton, Owings Mills, Parkton, Parkville, Perry Hall, Pikesville, Reisterstown, Ruxton, Sparks, Timonium, Towson, Westminster, White Hall, White Marsh Counties Served Baltimore, Carroll, Harford, Baltimore City