Different Types of Mortgages

Getting a mortgage can seem like a difficult step in the home buying process. There are many different types of mortgages and it is important to know how they vary in order to choose the option that is best for you.

• Interest only mortgages require you to pay the interest on the loan for a given period of time. These payments may seem smaller at first, but once a predetermined date passes, you will have to make larger payments to actually pay off the cost of the house.
• A fixed rate mortgage is one of the most common options. With this type of mortgage, the interest rate on the loan stays constant. These mortgages are usually scheduled to be paid back in either a 15 or 30 year period.
• A balloon mortgage is a short term mortgage in which, up to certain date, you can make low monthly payments until one large final payment is due.
• Adjustable rate mortgages use the market interest rate to determine the rate you pay on your loan. This means that every half year to a year the rate on your loan and therefore your monthly payment will change.
• Government backed mortgages are also available for some applicants. There are different types of government mortgages including some that are supported by the US Department of Agriculture loans for designated rural areas, the Federal Housing Administration for low income families, and VA loans for veterans of the United States Military.

Once you are aware of the different types of mortgages available, it will be easier to choose the option that is right for you.