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A fixed rate loan is the most common type of loan offered by lenders. It has a single interest rate and a monthly payment for the life of the loan (Typically for a period of 15 or 30 years).
This loan is perfect for homeowners who want predictability and aren't planning on moving again anytime soon. You pay X amount of dollars for Y years until the loan is amortized out (paid off). The rise and fall of interest rates do not change the terms of your loan, so you'll always know what to expect. If you move fairly often, then you may want to consider another loan type.
ARM loans offer interest rates typically lower than you'd get with a fixed-rate loan for a period of time—such as five or 10 years. But after that, your interest rates (and payments) will adjust, typically once a year, roughly corresponding to current interest rates. So if interest rates shoot up, so does your monthly payments; if they fall, conversley you'll pay less.
Good for home buyers with lower credit scores. Since people with poor credit typically can't get good rates on fixed-rate loans, an ARM can nudge those interest rates down enough to put home ownership within easier reach. These loans are also great for people who plan to move and sell their home before their fixed-rate period is up and their rates start vacillating.
A Federal Housing Administration loan, you can put down as little as 3.5%.
This loan is good for home buyers with some savings for a down payment. However, this type of loan comes with a few caveats. Most FHA loans are limited to $417,000 and don't provide much flexibility for price. FHA limits are determined regionally and vary across the country. Interest rates are typically fixed, with either 15 or 30-year term. Buyers are also required to pay mortgage insurance (upfront or over the life of the loan) normally around 1% of the cost of your loan.
If you've served in the United States military, a Veterans Affairs loan can be an excellent alternative to a traditional mortgage. If you qualify, you can score a sweet home with no money down and no mortgage insurance requirements.
This loan is v for veterans who've served 90 days consecutively during wartime, 180 during peacetime, or six years in the reserves. The VA has strict requirements on the type of home you can purchase: It must be your primary residence, and it must meet “minimum property requirements" (that is, no fixer-uppers allowed).
USDA Rural Development loans are designed for families in rural areas. The government finances 100% of the home price, requires no down payment, and offers discounted interest rates.
Good for families in rural areas of America (determined by USDA) who are not financially strong. These loans are designed to put home ownership in within reach. Your debt load cannot exceed your income by more than 41%, and, like the FHA loan, you will be required to purchase mortgage insurance.
Also known as a gap loan or “repeat financing," a bridge loan is a great option if you're purchasing a home before selling your previous residence. Lenders will wrap your current and new mortgage into one payment; once your home is sold, you pay off that mortgage and refinance.
This loan is for homeowners with excellent credit and a low debt-to-income ratio, and who don't need to finance more than 80% of the two homes' combined value. If you can meet these requirements, then this can be a simple way of transitioning between two houses seamlessly.