Engel Volkers - Bozeman - Buyer - Flipbook - Page 51
E n g E l & Vö l k E r s | B U Y E r ' s g U I D E
Types of loans
Most of us need a mortgage to buy a home, but this type of loan isn’t one-size-fits-all.
use our guide to help you find the right home loan for your needs.
Adjustable rate loan
Community homebuyer's program
adjustable or variable rate refers to the fluctuating interest
rate you’ll pay over the life of the loan. the rate is adjusted
periodically to coincide with changes in the index on which
the rate is based. the minimum and maximum amounts of
adjustment, as well as the frequency of adjustment, are
specified in the loan terms. an adjustable rate mortgage
may allow you to qualify for a higher loan amount but rate
maximums, caps, and time frames should be considered
before deciding on this type of loan.
this program is designed to assist first-time Buyers by
offering a fixed rate and a low down payment, such as 3 to
5% down. the program doesn’t require cash reserves, and
qualifying ratios are more lenient; however, the Buyer’s
income must fall within a certain range and a training course
may be necessary if required by the program. ask your loan
officer if this program is available in your community and
whether or not you might qualify.
Assumable loan
a true assumable loan is rare today! this loan is used to
enable a Buyer to pay the seller for the equity in the home
and take over the payments. assumable loans generally
require standard income, credit and funds verification by
the lender before the loan can be transferred to the Buyer.
Balloon payment loan
A balloon loan is amortized over a long period but the
balance is due and payable much sooner, such as amortized
over 30 years but due in five years. the loan also may be
extendable or it may roll into a different type. this could be
an option if you expect to refinance before the loan is due or
you plan to sell before that date. Discuss this option
carefully with your Lender before accepting this type of
loan.
FHA loan
this program is beneficial for Buyers who don’t have large
down payments. the loan is insured by the federal Housing
Administration under Housing and Urban Development
(HUD) and offers easier qualifying with less cash needed
upfront, but the condition of the property is strictly
regulated. the seller will pay a portion of the closing costs
that would typically be paid by the Buyer in a conventional
loan program.
Fixed rate loan
this loan has one interest rate that is constant throughout
the loan.
Graduated payments
Buy-down loan
this is a mortgage that has lower payments in the beginning
that increase a predetermined amount (not based on
current rate fluctuations as with an adjustable) usually on
an annual schedule for a specific number of years.
if you have cash to spare, you can pay a portion of the
interest upfront to reduce your monthly payments.
VA loan
Conventional loan
this simply describes a loan that is not obtained under any
government-insured program, but secured by investors. it
could be any type: fixed rate, adjustable, balloon, etc.
People who have served in the U.s. Armed forces can apply
for a VA loan, which covers up to 100% of the purchase
price and requires little or no down payment. the seller
pays much of the closing costs, but those fees are added to
the sales price of the home.
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