Anthony Frankson asked:




Explanation: Mortgage Types – Fixed Rate Mortgages

The basic mortgage has always been the 30 Year Fixed Mortgage. With this type of mortgage you get an interest rate that stays the same (fixed) for the entire length of the term. What this means is that you can count on paying the same monthly payment for the next 30 years without any “surprise” increases in the amount. You know what your payment will be each month and you can make your budget accordingly. There are now 15, 10 and even 5 year fixed mortgages but they come with a hefty monthly payment.

Explanation: Mortgage Types – Adjustable Rate Mortgage

Another mortgage example is the Adjustable Rate Mortgage or ARM. This type of loan adjusts to the fluctuations in the interest rate that is determined by certain market forecasting indexes. The interest rate of this loan is initially lower than the fixed rate but after the introductory period the loan then begins to fluctuate. This is a good choice when interest rates are low but can be burdensome when interest rates are high. One disadvantage of these loans is that you cannot predict exactly the monthly payments because they are subject to change.

Explanation: Mortgage Types – Convertible Mortgages

Convertible Mortgages are another example. This is a kind of hybrid of the fixed and adjustable mortgage. This is popular because it has flexible options; when rates are high you can convert to the fixed rate and when the rates are low you can convert back to the adjustable rate. This loan has other names such as Reducing Interest, Reduction Option, etc.

Explanation: Mortgage Types – FHA and VA Loans

The final two mortgage types are for special social categories. The FHA Loans by the Federal Housing Authority guarantees the repayment of loans made by private lenders to low and moderate-income level populations. VA Loans, by the Veterans Administration, guarantees the repayment of funds made by private lenders to qualified veterans who have served in the United States Armed Forces and the National Guard.

This is just a simple basic overview of the mortgages available today. With the above information you must now begin to get much more extensive information on the specific features that fit your particular situation best. The Internet is your best source for finding out this information because it allows you to make comparison rate shopping very easily.

The Internet is also the best resource for finding a lender with whom you can do business. Be sure to have an in depth discussion with your lender about the particular loan you are getting before you sign any papers binding you to a contract. Remember, never sign a contract if you any doubt about the terms of the mortgage agreement that is presented to you.

Jamie

Carrie Reeder asked:




In a regular mortgage, the borrower pays a specific amount each month in order to pay the mortgage off in full by the end of the mortgage term. This is called a fully-amortized mortgage. Option one mortgage loans differ from regular mortgages in many ways. This article will explain how option one mortgages work:

Payment Options

Option one mortgage loans have three different payment options: fully-amortized payment, interest-only payment, and minimum payment. The fully-amortized payment is the same payment you would make on a traditional mortgage. An interest-only payment covers just the interest you’ve accrued that month and none of the principal. A minimum payment covers the principal amount for that month and a portion of interest based on a rate established by the lender. This rate is usually between one and two percent.

Conversion to Adjustable Rate Mortgage

After a certain period of time — usually five years — the payment options end and the mortgage converts to an adjustable rate mortgage. This means that the borrower would then be responsible for fully-amortized payments through the remainder of the life of the loan.

Benefits and Disadvantages

Option one mortgage loans are beneficial for people whose income is temporarily fluctuating. It may be a good mortgage for a college student who will be able to afford fully-amortized payments after they graduate and gain employment. However, it is not a good mortgage for people looking to earn equity in their home. Borrowers should understand that any unpaid portion of interest not covered by their monthly payment is added to the principal amount of the loan and charged interest. Five years of minimum payments could cause your principal to jump, causing the fully-amortized monthly payments to be considerably higher than they would be had you paid the fully-amortized payment from the beginning of the mortgage.

Nicole

Jim Johnson asked:


For most people the mortgage industry seems to speak a foreign language, with terms and acronyms that are vague and unfamiliar. And of course, when dealing with large sums of money such as those found in a home mortgage, you want to try to understand the language as much as possible in order to avoid making mistakes. So here is a little primer on some of the most important terms used when getting a mortgage or home loan.

There are four types of mortgages that are generally available and those are fixed rate, adjustable rate, convertible and special loans.

Fixed Rate Loans – usually these are found in either the 30 year loan or 15 year loan category, and this simply means that you pay a fixed payment each month over the course of either the 30 years or 15 years.

Adjustable Rate Loans – this is where your payment can fluctuate depending on the prevailing interest rate at the time. If interest rates rise, then your payment goes up and if interest rates fall, your payment goes down instead.

Convertible Loans – these are loans that may start out as either a fixed rate or an adjustable rate mortgage, and then can be converted over to the opposite kind of loan instead. Many people will use this type of loan to start out as an adjustable rate mortgage and then convert over to a fixed rate mortgage when interest rates are at their lowest.

Special Loans – these include FHA loans for first-time homebuyers and folks with credit problems, and also VA mortgage loans for veterans of the Armed Forces and their families.

There are other terms that you need to know when it comes to getting a home mortgage as well and they are:

Appraisal – this is where you pay an independent person to correctly assess the value of your home using excepted market calculations.

Closing costs – these are fees that are usually payable when the mortgage papers are signed that pays for the transfer of the ownership of the home.

Points – this is a value that typically relates to 1% of the total cost of the home being mortgaged.

Escrow – this is where money is often held by a neutral third party in a transaction of two or more people.

Pre-qualify – this is where a lending institution will state that you do qualify for receiving a home mortgage for a certain price range of home.

Pre-approval – this is where a lending institution has already run the necessary paperwork and approved a home mortgage loan for a certain amount.

There are other special terms and acronyms used by the mortgage industry, but the ones listed above are perhaps the ones that are most commonly used. Hopefully this will help you be more informed when you try to get your next home mortgage loan.



FORREST