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4 Basic Types of Home Loans

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There are more options available for home loans today unlike before. That’s why now it’s necessary for the consumers to become familiar with all mortgage option, as well as different interest rates, terms, and fees. Like this it will be easy for the consumer to choose the best suitable home mortgage option. Basic purpose of home loans is that they allow the consumer to purchase a home. Most of people are not having enough savings to buy a home, so they depend on home mortgage.

There are various home loan types and it’s necessary to understand these various loan types so that you can make a decent decision. When you understand the home loan types then it becomes easy for you to choose the certain type of loan, which really suits your financial conditions. The four basic home loan types are:

  • Fixed Loan
  • ARM (Adjustable Rate Mortgage) Loan
  • FHA Loan
  • VA Loan

1 – Fixed Loan

This is a fixed rate home loan in which mortgage retains the same annual percentage throughout the life of the loan. Most popular fixed rate mortgage time period is for 30 years. There are 15-40 years time period fixed rate mortgages and also 50 year mortgages. Fixed rate home mortgage allow homeowners the security of knowing the exact amount of their mortgage payment for the life of the loan, from the first payment to the last. For example, if the interest rate on your loan is 5% it will remain the same throughout the life of the loan. Your monthly payment will be fixed also as the rate is fixed. The only thing which is not fixed in this loan type is property tax fluctuations. It’s easy to understand this type of loan.

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