A Federal Housing Authority (FHA) insured loan allows you to buy a home with a low down payment ranging from 3% to 5%, depending on the home price.
Conventional mortgages are not obtained under a government insured program, such as the FHA or Veterans Administration (VA). These loans are eligible for purchase by one of the two corporations chartered by the government and created to support the secondary mortgage market.
These corporations include the Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac) and the Federal National Mortgage Association (FNMA or Fannie Mae).
Do you currently or have you served in the United States military or U.S. armed forces? If so, you may be eligible for a loan through the Veterans Administration (VA). This government benefit allows veterans to obtain a mortgage for your new home with a low down payment.
Fixed Rate Mortgage
A fixed rate mortgage maintains a constant interest rate over the entire term of the loan. Your monthly principal and interest payment will not change and this type of mortgage is especially suited for those who expect to remain in their homes for a number of years.
Adjustable Rate Mortgage
An adjustable rate mortgage carries an interest rate that fluctuates over time. Typically, the initial interest rate is lower than that of a fixed rate mortgage. The lender bases its calculations on the index and margin of the mortgage. At each adjustment period, the lender ads the margin to the base rate, or index. Some types of index fluctuate more than others. With this kind of mortgage, low start rates can reduce your initial payments.
The balloon mortgage principal and interest payments remain the same over the term of the mortgage. These mortgages usually have a term of five to seven years, though they are amortized over 30 years. At the end of this time period, you must pay off the mortgage. This can be done by refinancing your mortgage and are typically offered at lower interest rates than other products. If you know you’ll be in your home for less time than your term on a mortgage, this may be a good option to explore.