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Types of Mortgage Loans

There are many different types of loans and programs, and you and your banker can decide which is the best for you.

Conventional Mortgage

A mortgage that is not part of a specific government housing initiative. If you have a good credit rating and a larger down payment (5% down is the minimum currently for Conventional Loans), this may be the best option for you.  If you put 20% down you will not have to pay mortgage insurance, otherwise, the lender will add a mortgage insurance payment to your monthly payment.  

FHA Mortgage

A loan sponsored by the Federal Housing Authority and insured through the government. There are many different programs through FHA, the most common of which is the first time home buyers' program which will allow a qualified homebuyer with limited credit history and a small down payment (3%) to purchase a home. There are also special programs for parents who want to purchase a home for their children while their children are in school (Kiddie Condo) and people who want to purchase a home that requires considerable maintenance. Speak to your banker for current programs and eligibility. Current lending limit: $200,160.

VA Mortgage

A loan program insured through the government for those people that have served in the military. This program will aid veterans in receiving a loan, allow them to finance 100% of their home, and require that the seller of the home pay many of the closing costs on the part of the buyer. Speak to your banker for current programs and eligibility. Current lending limit: 417,000.

Fixed Rate

A mortgage in which the APR remains unchanging throughout the life of the loan. With a fixed loan, you can be sure that your payments will never increase, regardless of changes in interest rates.

Variable Rate

A mortgage in which the APR changes with current rates. These mortgages usually start out lower than the current fixed rates, but have no guarantee on mortgage payment caps. To give you an idea, second quarter 2007, interest rates went from 5.7% to nearly 6.75%. Consult the chart on page 2 to see how much your monthly payment would have increased. I would urge you to consult a financial advisor before opting for a variable rate mortgage.

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