When buying a home, you have plenty of decisions to make. Where to buy, how much to spend, what style of home, and what mortgage lender to use are just a small sampling. Every day there is something new to decide on. When you start looking for a lender to secure your mortgage, know what the different kinds of loans are. There is more than one way to buy a house, and they all have different pros and cons. Zion Mortgage Lenders in Austin, Texas, will help make sure that you get a great rate on your home mortgage.
Conventional mortgages are home loans that aren’t insured by the federal government. Under that heading there are conforming and nonconforming loans. A conforming loan means the loan amount is within the maximum limits set by Fannie Mae or Freddie Mac. Mortgages that don’t meet the guidelines are considered nonconforming.
The government doesn’t loan money, but they do insure mortgages to minimize risk for lenders. The Federal Housing Authority insures FHA loans for people with medium-to-low income. These borrowers don’t have to put as much money down and usually have lower interest rates. If the borrower defaults on the loan, the government picks up the tab so the lender doesn’t have to.
Fixed-rate mortgages mean that the interest rate on the loan will never change. No matter what happens in the market or if interest rates go up or down, the rate on the mortgage will stay the same. This is good for borrowers who can put down 20% and lock in a low rate.
Adjustable Rate Mortgages (ARM)
Adjustable rate mortgages allow the interest rate to fluctuate with the market. If the key interest rate goes down, so will the rate on the loan, but it will also go up. ARMs usually have a fixed rate for the first few years of the loan. Once that time expires, the rate becomes adjustable and will change. There is always the option to refinance at when the rate adjusts.
Contact Zion Mortgage. We are experienced mortgage lenders in Austin, Texas.