With the real estate market heating up, properties in Hamilton County are selling quickly. And while finding the right house is unequivocally the most important part of the home buying process, navigating the mortgage is a close second. So before you’re ready to buy a new home, educate yourself on the different types of mortgages available.
Conventional: The bank loans you money in a conventional (or conforming) loan, which means your mortgage is neither guaranteed nor insured by the federal government. The loan term conforms to the standards and guidelines set forth by government-sponsored enterprises Fannie Mae and Freddie Mac, which outline loan limits on a yearly basis and more.
Conventional loans have either fixed or adjustable rates. A fixed mortgage locks in an interest rate for the entire loan term, while payments are made equally and incrementally on a monthly basis. With an adjustable-rate mortgage, or ARM, the rate fluctuates from year to year for better or worse.
Government Program Loans: Loans backed by the government protect lenders from defaulting, which in turn allow homeowners to receive lower interest rates as each mortgage is a less risky proposition. The most popular government-backed mortgages are VA, FHA, and Hope VI loans.
Hybrid Loans: Over the initial years of the mortgage, buyers have a low, fixed rate. A hybrid loan creates some breathing room for buyers over the first three, five or seven years to generate savings and increase financial flexibility. Once homeowners pay off the initial terms, the mortgage then becomes an ARM.
Bridge Loans: When a borrower has decided on moving into a larger home while still residing in their current home, a bridge loan is a great option. Usually spanning six months but extendable up to 12, interest rates are up to 2% higher than the average fixed-rate number. A bridge loan can cover liens or be a second loan in addition to liens.