Stable Interest
A fixed-rate mortgage has a constant interest rate and monthly payments throughout the loan term. Common terms are 15, 20, or 30 years. It provides stability, making budgeting easier, but initial rates may be higher than adjustable-rate mortgages.
An ARM has an interest rate that changes periodically based on market conditions. It typically starts with a lower rate for an initial period (e.g., 5 or 7 years) before adjusting. Payments can increase significantly if interest rates rise.
Backed by the Federal Housing Administration (FHA), this loan allows lower credit scores and down payments as low as 3.5%. It’s ideal for first-time buyers but requires mortgage insurance premiums (MIP), increasing overall borrowing costs.
Available to eligible veterans, active-duty service members, and their spouses, VA loans require no down payment or private mortgage insurance (PMI). They typically offer competitive interest rates but have a funding fee unless the borrower qualifies for an exemption.
Designed for rural homebuyers, USDA loans require no down payment and offer low interest rates. Applicants must meet income limits, and the home must be in an eligible rural area. A small upfront and annual fee applies instead of PMI.
A jumbo loan is for high-value properties that exceed conventional loan limits (set by Fannie Mae and Freddie Mac). It requires a higher credit score, larger down payment, and lower debt-to-income ratio but enables financing for luxury homes.
With an interest-only mortgage, borrowers pay only interest for a set period (e.g., 5-10 years). This lowers initial payments but doesn’t reduce the loan principal, leading to larger payments later. It’s riskier and suited for short-term property ownership.
A conventional loan isn’t government-backed and typically requires a higher credit score and 3-20% down payment. It offers competitive interest rates but may require PMI if the down payment is less than 20%. It’s popular among strong credit borrowers.
A balloon mortgage has low initial payments but requires a large lump sum (balloon payment) at the end of the loan term. It suits short-term buyers or investors but carries risks if refinancing or selling isn’t an option.
Designed for homeowners aged 62+, a reverse mortgage allows converting home equity into cash. No monthly payments are required, but the loan is repaid when the borrower moves, sells, or passes away. It can deplete equity over time.
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