Home Loans 

Home loans usually come in the form of a mortgage or home equity loan or home equity line of credit. A mortgage loan allows you, the homebuyer, to purchase a home. A home equity loan or line of credit is typically taken out to improve or remodel your current home. There are several different types of home loans, such as fixed rate loans, adjustable rate mortgages and interest only.

It is important to understand all your options. Home mortgages come in many different shapes and sizes. They each have different interest rates, terms, fees, etc. depending on your individual credit score. Understand these differences and how they relate to your personal financial situation will make a huge impact over the life of your loan, and may save you hundreds or even thousands of dollars.

Fixed Rate Mortgage
• Retains the same annual percentage rate throughout the life of the loan.
• Most popular type has a 30-year term.
• Also available, 15, 40 and 50-year terms.

Adjustable Rate Mortgage (ARM)
• Based on shorter term securities that can fluctuate based on leading financial indexes.
• Usually features lower payments which can make it more attractive to qualify for a larger home.
• Comes with the option to convert or home refinance to a fixed rate.

Interest-Only Loan
• Offers affordable monthly payments during the initial interest-only period, usually no more than five years.
• Can refinance or pay off the entire loan amount after the interest-only period.
• Use the savings to invest in a higher yielding investment during interest-only time.

Sub-Prime Loan
• For borrowers with a low credit score.
• Has a much higher interest rate and may also have stiffer pre-payment penalties.
• Also may have a balloon payment to pay off balance after specific period of time.

100 Percent Financing
• No down payment, full financed home.
• Must have good credit rating.
• Most lenders will require private mortgage insurance (PMI) or a piggyback loan.

80/20 or Piggyback Mortgage
• Ideal for homebuyers with little or no down payment.
• Eliminates the need for PMI.
• Homebuyer takes out two loans, one for 80 percent of the purchase price and one for the remaining 20 percent. The second loan usually has a slightly higher interest rate.

Jumbo Mortgage
• Loan amount above the industry standard, usually more than $400-500,000.

Home Equity Loan and Home Equity Loan Line Of Credit
• Existing home is used as collateral; considered a secured loan
• Typically used as a home improvement loan, but can also fund vacations, used to consolidate debt, pay off higher interest rate bills, etc.

Home Equity Loan
• Installment loan similar to home mortgage loan
• Borrower is given a specific amount of money to spend, and then pay back according to a set time schedule.

Home Equity Line Of Credit
• Similar to credit cards.
• Borrower is given a credit limit which they can borrow against.
• Usually have variable interest rates typically tied to the prime rate, but can be refinanced to fixed home equity loan.

No matter which type of loan you choose, you should be sure the mortgage best fits your financial situation and goals and seek the advice of a trusted mortgage company.