What types of mortgages are available?

Fixed Rate Mortgages: Payments remain the same for the life of the loan as they are not affected by interest rate changes and inflation.

Types of Fixed Rate Mortgage Loans:

15 year loan
30 year loan

Advantages of a 30 year Fixed Rate Mortgage:

In the first 23 years of the loan, more interest is paid than principal, which means larger tax deductions.
As inflation and cost of living increases, mortgage payments become a smaller part of expenses.

Advantages of a 15 year Fixed Rate Mortgage:

Loan is typically made at a lower interest rate
Equity is built faster because early payments go towards more of the principal.

Adjustable Rate Mortgages (ARMS): Payments increase or decrease on a regular schedule and reflect the changes in interest rates - payment increases are subject to set limits.

Types of Adjustable Rate Mortgates:

Balloon Mortgage: Very low rates initially (usually 5, 7, or 10 years) - When this time has elapsed, the balance is due or can be refinanced, though not automatically.
Two-Step Mortgage: Interest rate adjusts only once and then remains the same for the life of the loan.
ARMS linked to a specific index or margin

Advantages of Adjustable Rate Mortgages:

Typically offer lower initial interest rates
Monthly payments may be lower
Borrower may qualify for a larger loan amount

Combination Loan: A loan where you receive a first mortgage combined at the same time with a second mortgage. This type of loan may help you avoid the costs of private mortgage insurance (PMI) and/or the higher rate of a jumbo loan with as little as 10% down.

Popular Combination Loans:

80-10-10 (80% financed on 1st mortgage, 10% on 2nd mortgage, 10% down payment)
75-15-10 (75% financed on 1st mortgage, 15% on 2nd mortgage, 10% down payment)

Government Loans: Another mortgage option available to some people is a government loan, providing that you meet the qualifications for these loans.

Types of Government Loans:

VA Loans: Veterans may qualify for a loan from the Veterans Administration. There is a limit on the amount you can borrow, so this option works best for those buying a lower priced home.
FHA Loans: The Federal Housing Association offers loans to lower-income Americans. Look for the phrase "FHA approved" when looking at ads for homes.

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