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How To Choose The Best Loan To Finance Your Home
Total Articles: 6
Buying a home is one of the largest investments in the lives of most Americans. In recent years the economy has begun to improve along with the real estate market but citizens are far more wary than in the past due to the previous crash of the real estate market causing millions of Americans to be forced to foreclose on their homes. While many Americans are now buying homes they first will seek out information on what home loan option would best suit their needs and result in the least risk for foreclosure. Here are some of the top loan options available to consumers.
The fixed rate Mortgage is one of the most popular loan options. This traditional loan option involves fixing an unchanging interest rate to the home loan. The interest rate stays the same throughout the life of the loan. Home loans with a fixed interest rate will extend anywhere from 10 to 30 years and are structured to be completely paid off at the end of the loan. The adjustable rate mortgage (ARM) is the opposite of the fixed rate because the interest rate changes during the life of the loan. The interest rate on the adjustable rate loan starts low and gradually increases or decreases based on the current market.
Hybrid ARM mortgages are a combination of the fixed rate and the adjustable rate loan. In this loan option the rate is fixed for certain predetermined years and then the loan switches to the ARM. For example the fixed rate may last for 3 years and the ARM for 22 years in a 25 year loan. In this hybrid loan the interest rate will depend on the market. If the interest rate is high the home owners risk a high payment but if the interest rate is low they could potentially have an even lower payment than with the fixed rate part of the loan.
FHA loans are a mortgage option where the home loan is guaranteed by the Federal Housing Administration (FHA). Guaranteed loans are loans paid back by the guarantor in the event the homeowner defaults on the loan. The FHA loan does not specify the interest rate or the type of loan structure but just provides a loan with a low down payment, flexible requirements for income, and does not have high credit expectations. This type of loan is beneficial to first time home owners and reduces the risk to the borrower.
Interest only mortgages involve the lender paying the interest off before they begin to make any payments towards the principal. The interest only option can consist of the fixed interest or the adjustable rate mortgage to Finance the purchase of the new home but once the interest is paid the borrower is left with a high monthly payment unless they refinance. In this type of loan structure the home loan can be paid of before the end of the loan period which is usually 30 years. For a reliable and trusted loan service contact Sunrise Loans Services and receive a low interest rate loan and affordable closing costs.
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