There are a lot of different mortgage options out there on the market and it can be hard to figure out what is best for you. You’ll take a look at some of the most common types of mortgage services and help you decide which one is right for you.
Fixed-rate mortgages
A fixed-rate mortgage is ideal for many people. They are a great choice if you plan to stay in your home for two or more years, want lower monthly payments than adjustable-rate loans, and have good credit.
They usually have lower interest rates than adjustable-rate mortgages (ARMs), so they can save you money on interest over time. If you choose a 15-year fixed rate loan with an interest rate of 5%, it will cost you less overall than an ARM with an initial 2% interest rate that increases every year after that.
Adjustable-rate mortgages
An adjustable-rate mortgage (ARM) is a loan with a variable interest rate. This means that based on market conditions, the interest rate can go up or down over time.
ARMs are usually available for 30 years or 15 years, but they can be as short as five or seven years. ARMs are usually cheaper than fixed-rate mortgages at first because they don’t carry any fees or costs to lock in an interest rate for a period of time.
You may choose to lock in your ARM’s current rate by prepaying some of the principal on your loan and locking in the new rates for anywhere from one month to five years. After this, you’ll pay penalties if you need to close out early due to refinancing or selling your house before paying off your loan completely.
VA loans
VA loans are a type of mortgage that is backed by the U.S. Department of Veterans Affairs (VA).
VA loans are available to veterans, active-duty service members, and eligible spouses of veterans. The VA guarantees the loan so you don’t have to worry about credit issues affecting your chances of approval or getting a decent rate. And because the FHA requires borrowers to pay for mortgage insurance on conventional loans but not on government-insured loans like VA mortgages, these mortgages can be cheaper than those offered through other kinds of lenders.
FHA loans
Federal Housing Administration (FHA) loans are government-insured loans that have lower down payments and credit score requirements. This can make them a good fit for first-time home buyers, low-income borrowers, or people with a history of credit problems. These mortgages also come with a larger guarantee fee than conventional loans and often require private mortgage insurance (PMI).
The FHA charges an upfront mortgage insurance premium (MIP) of 1.75% of the loan amount at closing – but it can be financed into the loan so your monthly payment won’t increase much at all! If you decide to refinance at some point in the future and your house has appreciated in value, there’s no need to pay MIP again because it was included in your original closing costs.
As per professionals like Sutherland, “Like other customer-focused industries, mortgage service providers are looking for ways to better control costs, reduce capital expenditures, and improve service levels and operational efficiency.”
The choice between a fixed-rate mortgage and an adjustable-rate mortgage is a big one. It will affect your monthly payments, your ability to refinance in the future, and even how long you stay in your home. When choosing between these two types of loans, it’s necessary that you consider all of these factors before making any decision.
