There are many different types of mortgages out there for you to choose from. Most borrowers think of the fixed rate and adjustable rate mortgages but there are many other alternatives for you to choose from. Any of these alternatives will finance your home as well as any other.
Here are some different types of mortgages:
Assumable mortgages
This is not a common type of mortgage, if you have one of these mortgages you will simply give it over to the people buying the house when you sell it instead of paying off your mortgage. It can be hard to find one of these mortgages but many buyers would love to assume your mortgage especially if it has a low interest rate. These mortgage can save significant money on closing costs but most sellers with an assumable mortgage tend to charge more for the house that is selling.
Jumbo mortgages
This type of loan is a nonconforming loan. These loans are considered to be non conforming because they are for more than the limits that other popular lenders set. By doing this they are allowing everyone to get a loan in order to purchase their new home all over the country. The limit in questions changed each year and you can find these new limits on the internet each year when you need them. If you need to borrow more money than that there are ways to do this too, you would then get a Jumbo mortgage loan. These have a high interest rate. These loans are popular because they allow for borrowers to purchase bigger and better homes but the higher interest rate can break the bank down the road.
Balloon mortgages
Balloon mortgages are popular with some people because they allow you to pay very low payments for a set amount of years. But once these years have past you are expected to pay the rest of the loan all at one time. Some lenders allow for a convertibility option in which you can switch your balloon mortgage into a regular mortgage, a fixed rate or an adjustable rate. This loan is especially popular with those who are planning to sell their home before the end of their low payment term. If you do decide to refinance this loan instead of pay it off in full you could find yourself paying some hefty refinancing fees.
Seller financing
When it comes to seller financing the seller will give the buyer the financing that they need to buy the home. The payments that are made each month will go to the seller instead of to a financial institution like with a regular mortgage.
Construction mortgages
These loans are useful to people who want to build the house of their dreams. When you have one of these loans you will find that they are usually a two step type of loan with the interest at the beginning being higher. This is during construction when you are still using more money to pay off the workers. Once the house has been completed the mortgage will usually change into a traditional type of loan.
Two step mortgages
This type of mortgage will combine aspects of both a fixed rate mortgage and an adjustable rate mortgage. These types of mortgage are usually fixed at the beginning of the term and then adjustable for the rest of the life of the loan. When you see names such as 2/28 or 7/23, you are looking at two step mortgages. As far as the 2/28 this mans that for the first 2 years the rate is fixed and for the remaining 28 it is adjustable. These loans are good for people who have bad credit, the only problem is that if you do not improve your credit over time you will be stuck paying a high interest rate.
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