With numerous varieties of financing options and loans available from banks people have to know the option that is right for them. First they have to understand the common loan types and how they differ from each other. This will help them in choosing the best loan option. If you like to choose home mortgage loan, you will be overwhelmed by several types of business loans offered by your bank. Among the loan options you have to choose the one that fits best for you as well as your financial situation. The two important characteristics that vary in loans offered at many banks are the period of the loan and the collateral or security required to receive the loan. In general, mortgage is available in two types namely government and conventional mortgage loans. It is also available in two kinds of interest rate namely fixed and adjustable.
Government loan types
- The two common types of government mortgage or loans are VA and FHA.
- FHA types provide people lower down payment as low as 3.5 percent.
- VA type of mortgage has the option no money down. This kind of mortgage is available to people who are veterans, service members and spouses. People meeting these criteria can only obtain VA type of mortgage. People should be careful that there may be some additional fees associated with this type of loan.
- This mortgage requires a high down payment option. The down payment of conventional loans ranges from 3 to 20 percent.
- This kind of loans may have lower fees and interest rates.
Once you have chosen the right mortgage loan you have to choose between fixed or adjustable rates. If you choose the fixed rate mortgage, both the principal interest payment and the interest remains the same throughout the loan period that ranges between 15 to 30 years. If you choose the adjustable rate mortgage, both the interest rate and monthly principal interest payment remains the same for initial period of about 5, 7 or 10 years. After this initial period the rate will be adjusted annually based on current interest rate.
People can get help from a mortgage professional. The professional can help them by answering all the doubts they have regarding the mortgage type and rate options. He or she will help by guiding them through the loan process. Thus, choosing the loan option depends on the circumstance as well as goal of an individual. When a person is looking for a way to borrow money he or she must know these options. Understanding these mortgage options people can choose either a short term or long term mortgage depending on their needs. They can compare the types of loan and rate options offered by a bank to apply for the best loan type that suits their needs. Even they should meet the criteria to become eligible for obtaining the loan. Make sure you have read the terms and conditions of the loan before you apply for it.