Types of Mortgages
Freedom Mortgage has over 25 years of experience helping customers find affordable home financing. Because everyone's financial situation is unique, we offer many types of mortgages. Each type has different benefits and requirements.
Here are three ways to categorize different types of mortgages:
- Conventional or non-conventional. A conventional loan is not insured by the federal government. In contrast, FHA and VA loans are examples of non-conventional loans.
- Fixed rate or adjustable rate. Adjustable rate mortgages (ARMs) are sometimes called variable rate loans.
- Purchase or refinance. Purchase loans enable you to buy a property. Refinancing is when you restructure the loan terms and interest rate of an existing mortgage to meet your financial goals.
FHA loans are insured by the Federal Housing Administration.
- It is typically easier to qualify for an FHA loan than a conventional mortgage.
- An FHA loan might be best if you have less than perfect credit or are seeking a low down payment.
The FHA loan program is designed to help more Americans become homeowners. Freedom Mortgage is an approved FHA lender and has many years of experience helping borrowers get approved for an FHA loan.
The VA loan program is one of the benefits supported by the Veterans Administration (VA), an agency of the U.S. government. The VA does not lend money directly, but it insures VA loans offered by VA-approved lenders.
- VA loan terms and qualification requirements are quite favorable compared to FHA or conventional loans.
- A VA loan offers a low down payment and other special benefits for active military, veterans and eligible spouses.
- Freedom Mortgage has been a VA-approved lender more than 25 years.
Compared to FHA and VA loans, it is harder to qualify for a conventional loan. However, conventional loans offer many benefits. For example:
- You do not have to pay mortgage insurance premiums if your down payment is 20% or more
- Conventional loans are not subject to FHA loan limits
A conventional loan may be used to purchase second homes and investment properties as well.
Fixed Rate Mortgages
A fixed rate mortgage locks in your interest rate for the life of your loan. Therefore, although your property taxes and homeowners' insurance premiums may increase, your base monthly mortgage payment (principal and interest) will always stay the same. For that reason, many homeowners prefer the peace of mind that fixed rate mortgages can provide.
If you plan to stay in your home for a long time, a fixed rate loan may be more affordable than an adjustable rate mortgage. Freedom Mortgage offers 15-year and 30-year fixed rate mortgages. To compare 15-year versus 30-year mortgage payment schedules, use our mortgage calculator.
Adjustable Rate Mortgages (ARMs)
Homebuyers who are certain that they will soon be relocating often apply for adjustable rate mortgages (ARMs). With an adjustable rate mortgage, you get a lower interest rate (and therefore, a lower monthly payment) for an initial time period (usually the first 1, 3, 5 or 7 years). After that, your interest rate will reset at the market rate.
When your ARM resets, your new rate is based on market conditions, not your financial situation; you may end up paying more interest than you would if you had a fixed rate loan.
If you sell your house before your ARM resets, you may end up paying less interest than you would if you had a fixed rate loan.
Most ARMs have caps that limit how high the interest rate can go. Make sure you will be able to afford your payment if your interest rate reaches that cap.
If you have an ARM and you are concerned about the possibility of rising interest rates, you may want to consider refinancing into a fixed rate mortgage.
Call Freedom Mortgage to get a free quote and to find out more about the benefits of refinancing into a fixed rate loan.
Freedom Mortgage offers many types of mortgages. We'll take the time to help you find a home loan that meets your specific needs.