This section gives a short explanation of some of the mortgage programs that exist today.
Interest-only Loan: In an interest-only loan, or interest-only mortgage, the borrower only pays interest each month. This makes it cheaper than a conventional mortgage, in which part of each month’s payment goes towards the principal and part goes towards interest. These loans had become popular because the monthly payments are lower, allowing borrowers to afford a larger home.
Stated Income Loans: A stated income loan is a type of low-documentation loan. Your lender asks how much you make, you throw out a number, and they run with it.
Of course, qualifying for a stated income loan is not always easy. At a minimum, you have to have good credit. Furthermore, you’re supposed to tell the truth about your income even though you don’t have to prove it. Stated income loans are useful for business owners and people who want to keep their income level private.
Reverse Mortgage: A reverse mortgage is a loan that allows older homeowners to access the equity in their homes. Instead of making a mortgage payment to reduce your debt, you receive money and increase your debt. Reverse mortgages are an option for people who want to turn substantial home equity into cash.
Conventional Mortgage: The conventional home loan is the 30-year fixed-rate amortizing mortgage. With this loan, the homeowner has one interest rate set for the term of the loan, and each payment pays down the principal balance and interest.
Adjustable Mortgage: This mortgage typically comes with a five-, seven- or 10-year fixed-rate term before the interest rate is allowed to float for the remainder of the loan term.
FHA Loan: Federal Housing Administration loans are backed by the federal government and administered by participating lenders. The point of FHA-insured loans is to extend credit to potential homebuyers who would otherwise not qualify for conventional home loans.
VA Loan: A loan guaranteed against default by the borrower by the U. S. Department of Veterans Affairs. VA loans require no down payment and are offered exclusively to United States military personnel who are active, discharged or retired.
Balloon Loan: A variation of the conventional 30-year fixed-rate loan, the balloon mortgage typically has a similar loan structure but with a shorter term, which is generally five to seven years. The borrower has mortgage payments similar to those with a conventional loan, but is required to satisfy the entire loan balance in one lump-sum payment at the end of the loan term.
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