The Types of Mortgages available
By Millie Panjwani
There are various types of mortgages offered in the market today. Careful planning should be done in order to make the right decision. The type of mortgage you choose should suit your financial budget.
Several important factors must be taken into consideration when acquiring a mortgage. One of the most important factors is the type of interest applied on your loan. You can either choose from the fixed interest loans or the adjustable interest loans.
Among the many different kinds of mortgages available there are four very common ones offered to mortgage candidates. Some of them are as follows (each of them is subject to either fixed or adjustable interest rates)
1) The first type is a conventional mortgage which is usually less than $275,000. It is also known as a traditional mortgage and is insured by the Federal Government.
2) The second type is FHA (Federal Housing Administration). This is more suitable for the lower and middle income groups. First time buyers also prefer this type of mortgage plan. The FHA is a sector under U.S. Department of Housing and Urban Development.
3) The third type consists of the Veterans Administration (VA). Under this scheme all those trained under military service are insured but not funded. Mortgage candidates have the advantage of making a lower down payment compared to others.
4) The fourth type of mortgage plan is the “No-Document Loans”. It is often called the “no-doc mortgages”. This scheme mainly caters to all those engaged in self employment and by those who do not want their income to be checked. This kind of mortgage implies a simpler process of application and does not require any financial certification. However, a high rate of interest is applied on “no-doc mortgages” and is offered by very few lenders due to the high risks involved.
In addition to this, there is another kind of mortgage plan offered. It is known as an owner-financed loan. Under this type of loan a large amount of trust is built between the buyer and the owner. Since no fees are paid to other institutions for borrowing, the buyer and the owner could settle for a more reasonable method of payment.
The owner of the property also has an alternative. He could present the promissory note signed by the buyer to a bank or any other financial institution in return for a lesser amount of money. The owner doesn’t earn any interest on the initial loan but gets a lump sum for his property. This money could be used for undertaking other investments.
Therefore, if you want to purchase a property and do not have sufficient sources of funding, you can acquire a loan or a mortgage plan. There are many types available and you must make the right decision always keeping in mind your budget constraint.
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