Finding a new home is a big enough struggle as it is, let alone thinking about home mortgage loans. Many home buyers opt to hire a mortgage broker to handle the loan process for them, as it can be a long, complicated battle. Mortgage brokers can be a great option when shopping for a home loan because they are experienced, have connections with private lenders, help you find the cheapest mortgages, and handle all of the paperwork for you. While they can be very helpful, it is still important to have a solid understanding of the home loan industry so that you know what you’re dealing with. The home loan industry is complex, so the best way to start is by getting familiar with your different loan options. From there, a mortgage broker can go more in depth and give you advice about which loan is best for you. To brush up on the different types of home loans, take a look at some of the examples below:
Fixed Rate Home Loans – With this type of loan, payments and interest rates remain the same throughout the duration of the loan. Fixed rate mortgages offer stability and predictability, and are therefore the most common. This does not, however, make them the cheapest mortgages. One downside to fixed rate loans is that they often have higher interest rates.
Adjustable Rate Home Loans – As the name suggests, with an adjustable rate loan, the interest rate changes over time. While they start off as low interest home loans, adjustable loans are unpredictable over time. This makes it a good option for a short term loan, but means you can’t be sure how high the interest rate will get over time.
FHA Home Loans – FHA loans are backed by the government, more specifically the Federal Housing Administration. This type of loan offers you a variety of different options, as it is more of a category than a specific loan itself. It allows you to choose the term length and either a fixed or adjustable rate. Loans that are not backed by the government are called conventional loans and come from private investors.