Some Common Types of Mortgage Loans

For a mortgage seeker, the market today offers a number of mortgage options. While some mortgage plans exclusively suit home purchases, other mortgage options help finance requirements like higher education and consolidation of numerous debts. You should avail a mortgage plan that best suits your requirement. Mortgage options are plenty and before you avail one, you should hire the services of a good mortgage specialist, who will give you access to both information and lenders.

I will discuss three mortgage options here that are availed most frequently by mortgage seekers:

Fixed rate mortgage

A mortgage with an interest rate that is fixed during loan origination is known as a fixed rate mortgage. Borrowers who take fixed rate mortgages have to make consistent payments for a specified period of time. Initially, your monthly mortgage payments go towards clearing a larger portion of the interest than the principal. A benefit of taking a fixed rate mortgage is that your monthly payments will be stable even when market indexes and interest rates are unstable or rise. When interest rates drop however, you will not be able to capitalize on it as your interest rates are fixed. Mortgages should ideally be availed with the help of a good mortgage specialist, as he/she can advise you on market trends.

FHA loan

An FHA loan is a mortgage that is supported by Federal Housing Administration loan insurance. The purpose of this loan is to help Americans with low incomes afford a house. A borrower can avail this federal assistance to purchase a home if he has a mortgage insurance premium equal to a percentage of the loan amount at the time of taking out the loan. Most often, the mortgage insurance premium is paid by the mortgage lending company on behalf of the borrower. In addition to this amount, a monthly premium may be levied based on the loan to value ratio.

The FHA loan and PMI system was initiated by the Federal Housing Administration but over time their presence in this area has reduced. This is because several private mortgage insurance companies have started issuing these loans and PMIs. Presently the Federal Housing Administration caters to people who are unable to make a conventional down payment or those who do not qualify for PMI.

VA loan

The VA loan is also known as the Department of Veterans Affairs Home loans. The main purpose of instituting this home loan is to make it possible for returning service members to purchase a home. The main reason why VA loans are easily sanctioned by mortgage lenders is that the VA promises to pay mortgage lenders a quarter of every loan that borrowers default on. This way, VA loans partially protect mortgage lenders from defaulting borrowers. The main advantage of availing a VA loan is that the borrower gets 100% financing. Another benefit of taking a VA loan is that it does not require a borrower to fulfill too many criteria, making it possible for a number of service members to finance homes that would otherwise not have been possible.

Whichever mortgage you decide to go for, it is a good idea to consult a mortgage specialist on your options and use his/her knowledge to get the best deal on your loan.

For more information on mortgages in Canada, contact a mortgage specialist at Canadian mortgages Inc