A Quick Reference for the Various Loans and Types
The loans available to buy a new home were limited a few years back. The buyers had only a few options like the fixed rate conventional mortgage, an FHA loan or a VA loan. However, with time, various loan plans were introduced and today, buyers can select from the numerous options that are available to suit their needs.
The most common loans that are usually available are the fixed rate mortgages and the adjustable rate mortgages. These mortgage plans have some variations as well. Apart from this, another loan available is the reverse loan. This loan plan supports the homeowners above 62 years by converting some part of the home equity into their source of income.
30 Year Fixed Rate Loan
The 30 year fixed rate loan is the most common type of home loan. In this mortgage plan, the borrower has a period of 30 years to repay his loan, and the interest rate is fixed. This loan plan is appreciated by people, as the loan payments are steady as well as predictable.
15 Year Fixed Rate Loan
The second most common loan plan is the 15 years fixed rate loan plan. This assists the borrower in purchasing the home in just half the standard time. The monthly loan payment of this loan plan is higher, because the loan is of a shorter duration compared to the 30-year plan. The qualification requirement of this loan is not easy to meet.
Adjustable Rate Mortgage
This type of loan plans have lower monthly loan payment as well as a low rate of interest because the rate of interest changes. Many borrowers prefer this loan plan, as the initial payments that have to be made are smaller. However, the borrower has to accept an increase in the loan payments, and this can sometimes be significantly high.
Loans Having Interest Only Payments
This type of loan plan is usually available for a short period, and the monthly payments would thereafter increase largely. However, this permits borrowers to make lower monthly payments without any significant increase in loan balance. Since the borrowers do not build up equity until the time value of property is not increased, the loan balance remains the same.
With the help of this loan, homeowners aged above 62 years or more can convert a part of their equity into income. This mortgage plan is quite secure. In this plan, the owner does not have to pay the loan amount until their death, unless they permanently shift from the place or sell it.
In the buydown loan, the rate of interest is low. There are two types of buydown loans, temporary and permanent. The monthly loan payments and interest rates of temporary loans are low for some time, whereas, in case of permanent loans, the interest rate is low and is fixed.
Fixed Rate Mortgage Plan
This is the most famous loan plan. The loan amount is entirely amortized in this loan plan. For borrowers who are taking home loans for the first time, the FHA Loan is the most suited option. The requirements for the down payment are reduced to a minimum and the loans get insurance from the government.
VA Home Loans
VA loans are given to the veterans by the government. The main benefit of these loans is these loans require no down payment. Another loan option is an interest-only loan, where the applicant has the option to only make payments on the interest amount.
Mortgage Plans with Adjustable Rates
In this loan plan, the rate of interest fluctuates periodically. The borrower also has several options for the payments as well as index rates. In the combo mortgage loan, there are two loans. The loan in this type can be either fixed or adjustable or a combination of these two. Most of the borrowers prefer taking both the loans in order to avoid paying private loan insurance.
The rate of interest keeps on fluctuating in the adjustable rate loans. The individuals who wish to pay lower interest rates initially choose mortgage buydown. The interest rate in this plan is lower, because the fee is paid at a lower rate, therefore the name buydown. The buyers can buy down interest rates for the borrowers in this plan.
Streamlined K Mortgage Plan
This loan plan rolls up the entire funds in a single mortgage. It is very easy to get this loan, and the paperwork required is very less. The bridge loans are utilized when buyer puts up the property that is not sold as well as the seller borrows the equity in order to buy a new home.
These loans are used in obtaining cash from various financing agencies. The loans are either adjustable or fixed, and the applicant can choose one to draw funds when required. The lender makes monthly payments to the borrower in this loan as long as the borrower stays in the house.
A Quick Introduction to Home Affordable Refinance As Well As Loan Modification
The Home Affordable Modification Program helps and supports the homeowners who are struggling to make the monthly loan payments. This loan program significantly lowers the loan payments, makes it convenient, and at the same time sustainable in the end for the borrowers. If a person is currently occupying a house but has no employment, he becomes eligible for HAMP or home affordable modification program.
This program has been a great support to the homeowners who are trying to avoid foreclosure on their loans that comprises of FHA loans as well as equivalent programs for VA home loans. Under the latest loan program, there are many modifications and refinancing options from which to choose. The homeowners, who have FHA loans have many options to save their property, prevent default and make the loan payments smoothly.
What Is Home Affordable Refinancing and Loan Modification?
In this plan, the qualified borrowers are supposed to pay a lower rate of interest, and the monthly payments are more affordable. Refinancing is a process of replacing the old loan with a new one by using the new interest rates as well as other terms. The refinancing loan options are for those borrowers who are presently making loan payments for the last one year. The HAMP is slightly different where the borrowers qualify when they have a conventional home loan of the FHA loans from some years back, and are finding it difficult to make the monthly loan payments.
Who Is Eligible?
A person qualifies for HAMP or Home Affordable Loan Modification when he is not able to make the monthly loan payments. The borrower finds it difficult when there is a sharp increase in monthly payments on the variable rate loans. It also comprises of the financial hardships because of any reason. The circumstances to qualify may vary, thus it is better to find out the specific issues, which are related to loan payments, to know if you can qualify for HAMP.
A refinancing loan is different from FHA loan modification. Whenever a loan is modified, a part of the original mortgage might be forgiven. The terms of an existing loan are negotiated again or interest rates and loan payments are lowered. Such changes are made to the original loan plan instead of getting a new loan. A qualified borrower can select from any of the mentioned options.