Mortgage Types - The FHA Loan

The FHA loan is insured by the Federal Housing Administration. This type of loan is open to all qualified homebuyers. While there are limits to the size of FHA loans, these limits usually cover most moderately priced homes. FHA loans also offer low down payments (usually 3-5 percent).

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Types of Mortgages - The VA Home Loan

The VA loan is a long-term home loan guaranteed by the Department of Veterans Affairs.

A common misconception about the VA home loan is that the VA actually loans the money. But this is not the case. The VA insures the loan, but a regular mortgage lender loans the money. Because this loan is insured by the VA, it has the additional benefit of a low-money down payment (or a zero down payment).

VA home loans are only available to qualified military veterans who have obtained a certificate of eligibility from the Department of Veterans Affairs.

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Types of Mortgages - The Balloon Mortgage

The balloon loan is a short-term loan with a fixed-rate. With this type of loan, you can make small payments for an introductory period of time. That's because the interest rate is usually much lower than a fixed-rate mortgage loan.

After the introductory period -- normally five, seven or ten years -- you must either refinance the loan or pay off the remaining balance in a single lump-sum ("balloon") payment.

Most borrowers who choose this option intend to refinance before the balloon period arrives. But this can be risky, because refinance is never a guaranteed thing. In short, be very careful when considering a balloon option!

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Types of Mortgages - The Adjustable Rate (ARM)

The adjustable rate mortgage -- commonly referred to as an "ARM" -- gives you a fixed initial interest rate and monthly payment. The word "initial" is key here, because after an initial period (specified within the terms of the loan), an ARM loan will be subject to changes in market conditions.

Your interest rate during the initial fixed period will probably be lower than it would be or a regular fixed-rate mortgage. But uncertainty sets in after the initial period.

An ARM might be a good option for you if you only plan to stay in a home for a short while. If you in turn sell the house during the initial fixed-rate period, you benefit from the lower interest rate while avoiding the uncertainty that sets in after the fixed-rate period.

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Learn more about adjustable mortgages in our mortgage section
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Types of Mortgages - The Fixed-Rate Mortgage

by Brandon Cornett

A fixed-rate mortgage offers an interest rate that will never change over the life of the loan. The primary benefit is that if interest rates increase during the term of your loan, your rates stay the same.

On the other hand, if interest rates drop during the term of your loan, your rates still stay the same (unless you refinance your home at the lower rate). This is the biggest difference between this loan and variable / adjustable loans (see next item).

The length (or "term") of a fixed-rate mortgage can be 15, 20 or 30 years. Each of these terms has its pluses and minuses:

• 30-year fixed rate - The 30-year term gives you maximum tax advantage by having the greatest interest deduction. It's also worth noting that the 30-year fixed-rate loan is often the easiest type of loan to qualify for.


• 20-year fixed rate - If you shorten your mortgage, you usually get a lower interest rate. The 20-year mortgage is not as common as the 30-year, so you'll have to shop around to go this route.


• 15-year fixed rate - Same benefits as the 20-year term (quicker payoff, lower rates), but will increase the monthly amount you pay.

Learn more about fixed rate mortgages

Home Inspection Q&A: Where to Find an Inspector

Question:
What's the best way to find a home inspector?

Answer:
Finding a qualified home inspector is usually fairly simple. Here are some ideas:

• Ask a friend or coworker who has recently bought a home in the area.
• Ask your agent if he or she can recommend a qualified inspector.
• Visit the American Society of Home Inspectors website: www.ashi.org.
• Visit the National Association of Home Inspectors website: www.nahi.org.

Check Their Credentials
When you find a candidate, ask how many home inspections he has done. Also ask what certifications he carries. Your home inspector should be certified by one of the national associations.

Good luck!

-Brandon from HomeBuyingInstitute.com

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The Home Inspection - Who's Fixing What?

In a previous post, we talked about the home inspection process and what home inspectors do. So, now you've decided to have an inspection, and your inspector comes back with a list of discrepancies.

So what next? Who's fixing what?

When you review the inspector’s list with your agent, you’ll have to decide which items (if any) you want the sellers to repair. Like nearly everything else in the home-buying process, the fix-it list is negotiable. When you submit your list of requested repairs to the sellers, you face one of several outcomes:

1. The seller will agree to fix all of the items.

2. The seller will agree to fix some of the items.

3. The seller won’t agree to fix any of the items.

4. The seller will reduce the price in lieu of certain repairs.

How you proceed in light of the seller’s response is up to you and your agent. A good rule of thumb -- don’t ever turn a blind eye to a major repair issue just because you’re excited about getting in the house. If you’re an experienced investor and you’re buying the house specifically to fix it up, that’s one thing. But if you’re buying your first home, be conservative and carefully consider each item on the inspector’s list. It will benefit you in the long run.

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Home Buying Q&A: What Does a Home Inspector Do?

In short, an inspector checks the safety and functionality of your potential home. Inspectors focus primarily on the structural and mechanical aspects of the home.

Get a home inspection as soon as possible after the sellers accept your offer. Make the contract contingent upon the home inspection. That way, if the inspection uncovers a major flaw that you’re unwilling to accept, you have a legal way out of the contract.

Don’t confuse the home inspection with the home appraisal. The home appraisal protects the lender’s financial interests. The home inspection protects you, the buyer. The appraisal is the bank’s way of determining whether or not the house is worth the price you’ve agreed to pay. The inspection is your way of identifying structural or mechanical problems with the house.

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