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What types of mortgages are available to consumers for a home purchase?
There are many types of mortgages available to consumers to purchase a home, depending on your financial situation, including fixed-rate mortgages, FHA loans, interest-only loans, and adjustable-rate mortgages.
What is a fixed-rate mortgage?
A fixed-rate mortgage has a fixed interest rate for the period of the loan, and allows you to pay off the loan over a period of time. Such amortization periods can be 10 years, 15 years, 20 years, 30 years, and even 40 to 50 years.
What is the distinction between the different loan periods?
The shorter the period of the loan, the higher the monthly payments, and the less interest you have to pay over time, since you are borrowing and using the money over a shorter period of time.
What is an "FHA mortgage"?
The Federal Housing Administration, which provides mortgage insurance through FHA-approved lenders, is the largest insurer of residential mortgages in the world. Depending on the state in which you live, the amount you can borrow for a mortgage may differ.
Who uses FHA mortgages?
FHA mortgages are used by first-time homeowners because they require a smaller down payment than conventional mortgages.
How long must I pay for mortgage insurance with an FHA loan?
FHA loans require the borrower to pay for the insurance for five years, or until the loan-to-value ratio reaches 78%, whichever is longer.
What is a loan-to-value ratio?
A loan-to-value ratio is the loan amount divided by the house's selling price.
What is "mortgage insurance"?
Mortgage insurance protects lenders from losses if a mortgage is not paid in full. Depending on the amount of your down payment to purchase a home, you may be required to obtain mortgage insurance until you have paid off enough of the loan, minimizing the risk of defaulting on the loan.
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