| Every year, thousands of people ask themselves the | | | | contract. After the initial term, the interest rate will |
| question of how to find the best home loan. Most | | | | change periodically according to financial markets. |
| people would agree that a home loan is one of the | | | | It is important to understand that ARM contracts can |
| biggest investments the average consumer will make | | | | vary greatly. You will certainly want to see if the |
| in a lifetime. Having the wrong home loan can be | | | | contract includes caps on the level of interest that |
| expensive, and it can even lead to foreclosure if the | | | | can be charged. A contract without a cap could lead |
| payments cannot be made on time. Understanding | | | | to disaster. |
| what the various types of home loans are is the first | | | | Federal Housing Authority Loan or FHA: The Federal |
| step to finding the best home loan. | | | | Housing Authority (FHA) does not actually loan |
| In general, there are seven types of common home | | | | money to buyers but rather it insures loans for |
| loans. There are, of course, unique hybrid loans which | | | | lenders. By backing up the loan, the FHA programs |
| can be negotiated, but for the most part home loans | | | | allow lenders to justify larger loans with smaller down |
| will fall into one of these categories: | | | | payments. The amount that the FHA will back up |
| The Conventional Mortgage: This is a fixed rate loan | | | | varies from region to region so make sure you |
| through a commercial lender for a term of 15, 20, or | | | | explore what is available to you by reading the |
| 30 years. The commercial lender is usually a bank or a | | | | proper criteria. |
| mortgage lender. The amount of the monthly | | | | VA Loans or Veteran Affairs Loans: According to |
| payments, the interest rate, and the terms of the | | | | their literature, "The Department of Veterans Affairs |
| loan are locked in by the home loan contract. If the | | | | provides guaranteed loans for qualified veterans and |
| buyer does not have at least 20% for a down | | | | servicemen". What is so special about these loans is |
| payment, these loans require private mortgage | | | | that they allow the qualifier (the buyer) to offer little |
| insurance, also known as PMI. | | | | or no down payment for the loan. There are some |
| ARM or Adjustable Rate Mortgage: In many respects | | | | restrictions and these loans are subject to the VA |
| the ARM is similar to a conventional mortgage. What | | | | mortgage fee which is dependent on the size of the |
| changes in the ARM is the interest rate. While the | | | | down payment. The VA mortgage funding fee is |
| interest rate for a fixed rate loan will not fluctuate, | | | | usually equal to 2% of the loan amount for the |
| the interest rates for an ARM will. ARM mortgages | | | | first-time buyer. The VA funding fee may be waived |
| adjust up or down, according to the terms of the | | | | for disabled veterans. |