A mortgage loan is a form of borrowing money from a financial institution in exchange for the promise to repay with interest. A typical mortgage loan is one in which the lender agrees to lend some amount of money to a borrower, and that borrower undertakes to pay back some specified sum at some future date or over a set period of time. This article will discuss different types of mortgage loans that you can benefit from.
1. Fixed-Rate Mortgage
Fixed-rate mortgage loans are secured by a property, such as a house or an apartment. The principal sum is usually paid in full at the time of obtaining the loan, and it is also usually paid off early. The interest rate on a fixed-rate mortgage is fixed for the entire repayment period, and it reflects the risk that property could be worth less than what was originally borrowed against.
2. Adjustable-Rate Mortgage (ARM)
An adjustable-rate mortgage (ARM) loan has two components: one that remains constant, and another that changes over time. The interest rate and payment remain the same for a given period of time (e.g., one year), and then resets (rises or falls) according to a variable interest rate index (typically, the value of U.S. Treasury securities).
3. Government Insured Mortgages
A government-insured mortgage is a home loan backed by a government agency such as the Federal Housing Administration (FHA). All FHA mortgages are required to be insured, and lenders can obtain insurance from the FHA for mortgages that they write. There are limitations on the maximum amount that the federal government will ensure.
4. Jumbo Mortgages
A jumbo mortgage is a term that describes a loan that exceeds current limits on conforming mortgages. In general, a conforming mortgage must be for a principal balance of less than a certain amount fixed by authorities in the U.S. In addition, these loans typically have maximum limits on their interest rates and fees to ensure that the borrower does not pay more over time than they would have been if they had been able to obtain a normal conforming loan. Only a few people are eligible for such mortgages.
5. Reverse Mortgages
A reverse mortgage is used by borrowers who are at least 62 years old and own their home outright or have a paid-off mortgage to convert their equity into cash or guaranteed payments. Borrowers can use reverse mortgage funds to buy a home, pay for medical care and other necessities, and supplement their retirement income. The reverse mortgage funds come from the lender in the form of a monthly or annual payment, and they provide borrowers with cash in exchange for agreeing to live in the home until death.
At Socal Home Mortgages, you can learn the financing basics and provide tips for first-time home buyers. They provide home loans and other housing finance options. They also have some of the best mortgage brokers and home loan experts in California.