Home Purchase Loan Tips

When it comes time for you to buy your home, finding a home purchase loan can plunge you into a sea of confusion. There are so many options to choose from and so many terms. How do you tell the difference between your home purchase loan options? Understanding the basic types of mortgage loans available can help you as you start to look at all the versions of each of these home purchase loans available to you.

1. Let's Start with the Traditional

There are some traditional home purchase loan choices with which most people are familiar. There are the standard fixed rate and adjustable rage mortgages that get the most attention. A fixed rate home purchase loan is when your interest rate remains the same for the life of your home purchase loan. On the other hand, the adjustable rate mortgage, or ARM, allows the mortgage lender to alter the amount you owe based on changes in the interest rate.

2. FHA, VA

While fixed rate and adjustable rate home purchase loans tend to be the traditional mortgages available, there are some government programs you can consider if you qualify. There is an FHA home purchase program and a VA program along with an RHS program. An FHA mortgage is not a loan per se, but it is a program that will guarantee a home purchase loan provided by a lender. A VA loan is available to veterans or members of the armed forces, and these home purchase loans require very little down payment and less stringent qualifications. The RHS program is offered through the U.S. Department of Agriculture, allowing rural residents to have very low closing costs and down payment.

3. Non-traditional

There are also non-traditional loans available like interest-only, reverse mortgages, and jumbo home purchase loans. A reverse mortgage may be a good option for older individuals, because it allows the equity they have built in their home to supplement their income. Interest only home purchase loans come in both fixed rate and adjustable rate forms, and they allow you to only pay on the interest portion of your loan for the first three to ten years of your loan. The initial loan payments will be lower, but after the initial period your payments will be higher than they would have been with a traditional fixed or APR home purchase loan.

4. Jumbo

Jumbo loans are those that are above the loan amounts determined by Fannie Mae and Freddie Mac. These home purchase loans have a little higher interest rate than other loans, because there are only small percentage of jumbo loans bought and sold.

5. Combo Loans

When you begin to shop around for home purchase loans, you will find loans that fit neatly into the basic mortgages available, and then you will find combination of home purchase loans. For instance, you can obtain a fixed-period ARM, where you can have three to ten years of fixed rate payments before your initial interest rate change. There are a number of combinations available.