When planning to buy a home, you will likely need to get a mortgage. A mortgage is essentially a loan that you take out to enable you to purchase a home. It works by enabling you to borrow money from the bank in exchange for equity in your home.
Once you have repaid the loan with interest, you own your home and keep all future equity as well. However, there are numerous types of mortgages available on the market today—different mortgage products exist for different people and different situations.
It can be challenging to know which mortgage is right for you, especially as there are many considerations when taking out a US home bank mortgage. To help you out, we’ve listed below some of the most common mortgages available today:
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1. Fixed-Rate Mortgages
A fixed-rate mortgage is a type of mortgage that has an interest rate that does not change over the course of the loan. As such, the monthly payment amount is also fixed; you will know exactly how much you will have to pay each month for your mortgage.
For many people, fixed-rate mortgages are the ideal option; they allow you to plan your finances with certainty. This is particularly true if you intend to own your home for a long time, since many fixed-rate mortgages have long fixed rates.
2. Adjustable-Rate Mortgages
An adjustable-rate mortgage, or ARM, is a type of mortgage that has an interest rate that changes periodically over the course of the loan. ARM mortgage rates are often lower than other types of mortgages during their introductory period, which may be a few years.
However, after this period is over, your interest rate will likely increase and remain at that level for the remainder of the loan.
3. Debt Consolidation Mortgages
Debt consolidation mortgages (also known as debt refinancing mortgages) are special types of mortgages that investors use to consolidate and refinance existing debt.
Debt consolidation mortgages have fixed monthly payments and are thus similar to fixed-rate mortgages. However, the different types of debt you refinance into a debt consolidation mortgage will remain as a lien on your property. This means that if you ever sell your property, the debt will have to be paid off before you can receive the sale proceeds.
4. VA Mortgage
Veterans who qualify for the VA loan program can access some of the lowest interest rates on the market—making the VA mortgage one of the best deals available to today’s homebuyers.
In addition, there are no down payment requirements for veterans using a VA mortgage to purchase a home. The only downside to the VA mortgage is that it does not allow for cash-out refinancing—meaning you cannot refinance your VA loan into a fixed-rate mortgage with a larger balance in order to pay off higher-interest debts.
5. Conventional Mortgages
Conventional mortgages are the most common form of mortgage because they require the least amount of upfront capital from the borrower.
Because the borrower only has to put down a fraction of the home’s total cost, conventional mortgages are more accessible to a wider set of people than other types of mortgages.
We’ve talked about what some of the most common types of mortgages are, and we think you’ve learned something valuable. Now, you may be wondering when you’re going to be able to get your hands on a new US home bank mortgage and finally buy your dream home.
The truth is that you don’t need to wait until you’ve saved up a ton of cash to finally buy a home. You can get a mortgage as soon as you have a down payment amount saved up.
If you’re hoping to buy soon and you want to find the best US home bank mortgage for your situation, make sure you do your research. Find out the different types of mortgages available and know what your options are so you can make a smart decision.