Whether you’re a buyer or investor you’ll want to know the up to date and different types of mortgages, the qualifications, and the benefits. Here’s the three most common mortgages:
Fixed-Rate mortgages offer the same interest over the loans entire life. This means the monthly payments are always going to be the same. These mortgages come in 10,15,20,30 years. Fixed-rate mortgages do come with the highest interest rates with the most common loan products.
Adjustable-Rate are mortgages that have a fluctuating interest rate. These usually are listed for 5, 7, or 10 years. These usually offer a fixed rate period upfront before the interest rate resets, usually including a cap on how much your interest can adjust and how often. Adjustable rates can be 0.5 to 1% lower than a fixed rate loan.
Interest-Only loans are where the borrower only pays the interest on the loan, not the principal, for a set amount of time, usually 5-7 years. At any time, the borrower can make a large payment towards the principal with no payment penalty. As long as your real estate property has appreciated by 12%, you’ll be ahead with the minimum interest-only payment.
Qualifications vary depending on each mortgage loans. Usually, the riskier the loan the tougher the qualifications are. An interest-only loan will usually require higher credit scores, higher income levels, and more cash compared to a traditional loan. The most important thing to do up to a year in advance is to pay off credit card balances, make on time payments, avoid any other major purchases before the loan.