Loan Types

The vast variety of loan types that you can apply for in this day and age is truly mind boggling. Use this simple guide to help you decide which type of loan meets you needs.

Mortgages

When it comes to mortgages, there are a several types to choose from:

• Fixed-Rate Mortgage - A mortgage that has a fixed or set interest rate that stays in force for the entire length of the loan whether it’s for 15 years, 30 years, or whatever length of time agreed upon by the lender and borrower. Since your interest rate remains the same throughout the life of the loan, your monthly payments also remain the same.

• Adjustable-Rate Mortgage (ARM) - A mortgage that has a variable interest rate. Since the interest rate you pay can vary, your monthly payments can fluctuate (either up or down) over the life of the loan.

10/1 ARM - an adjustable rate mortgage that has a fixed interest rate for ten years and then adjusts annually for the remaining years of the loan.

7/1 ARM - an adjustable rate mortgage that has a fixed interest rate for seven years and then adjusts annually for the remaining years of the loan.

5/1 ARM - an adjustable rate mortgage that has a fixed interest rate for five years and then adjusts annually for the remaining years of the loan.

3/1 ARM - an adjustable rate mortgage that has a fixed interest rate for three years and then adjusts annually for the remaining years of the loan.

1 Year ARM - an adjustable rate mortgage that has a fixed interest rate for one years and then adjusts annually for the remaining years of the loan.

• FHA Loans - The Federal Housing Administration (FHA) is a division of The U.S. Department of Housing and Urban Development (HUD). FHA does not directly loan money to homebuyers. The FHA provides mortgage insurance on loans made by FHA-approved lenders, so that buyers who have less then the standard amount banks require for a down payment can qualify for a loan.

  For more information go to HUD's website.

• VA Loans - The Department of Veterans Affairs provides mortgage insurance benefits to veterans. VA loans make it possible for veterans to get loans with no or low down payments and are easier to qualify for.

  For more information go to The Dept of Veterans Affairs website.