Understanding the Different Types of Mortgage Loans

Most people don't have enough cash to actually be able to purchase a home outright. Instead, they depend on getting a mortgage to help them finance this large purchase. However, the process can be confusing, especially for first-time buyers and those who aren't familiar with the different types of mortgage loans available.

Fixed Vs. Adjustable Rate

The first consideration is whether to get a mortgage with a fixed rate or one with an adjustable rate (sometimes called an ARM for short). ARMs sometimes have a short set period in which they have lower interest rates than fixed-rate mortgages, but then this rate will start to vary, which can lead to people having payments that go up quite a bit. It tends to be a safer bet to get a fixed-rate mortgage so the house payment will be the same and not increase over time.

Texas fha loans

Conventional Loans Vs. Those Insured by the Government

There are four main types of mortgage loans, conventional loans and then the three types insured by the government, including USDA loans, VA loans and FHA loans. VA loans are available only to those who serve or have served in the military and their families. USDA loans are meant for people in rural areas that don't have very high incomes. Texas fha loans are available to anyone who fits the guidelines for these loans and tend to have less stringent requirements that make it easier for people who don't have very high credit scores or who can't afford to put down a very large down payment to purchase a home. FHA lenders are specially approved by the FHA to offer these loans, which tend to have lower fees and lower interest rates than conventional loans. Borrowers do need to pay mortgage insurance, in some cases throughout the entire term of the loan, and they still must put something between 3.5 and 10 percent down on the home, with the amount depending on their credit score. There are also limits to how much a person can spend using this type of loan on a house to make it less likely people will buy homes they can't really afford.