Understanding Mortgage Loans!

Buying a home is probably going to be one of the biggest investments you will ever make and if you have found that home that meets all your needs, you’ve probably come to realize there is several types mortgages that are available to you. They’re all different, and they can all be confusing to a new home buyer. Here is a brief description of the different types of mortgage loans; 

Fixed-Rate Mortgage
Interest is fixed for an amount of time; 10, 15, 20, 30, or even 40 or 50 years, at which point the amortized principal is paid in full.

Adjustable-Rate Mortgages (ARMs)
The interest rate fluctuates with an indexed rate plus a set margin; adjustment intervals are predetermined. Minimum and maximum rate caps limit the size of the adjustment.

• 1-yr. Treasury ARM
The rate is fixed for one year, then becomes adjustable every year. The new rate is determined by the treasury average index plus the loan margin (usually 2.25-2.5%). 30-yr. term.

• Intermediate ARM
With an intermediate or hybrid ARM, the rate is fixed for a period of time, then adjusts on a predetermined schedule. This is shown by the number of years the loan is fixed, and the adjustment interval (e.g., 3/1 ARM is 3-year fixed, and 1 adjustable annually). The new rate is determined by an economic index (usually treasury or treasury average index) plus the loan margin (usually 2.25-2.5%). 30-yr. term.

• Flexible Payment Option ARM
The borrower chooses from an assortment of payment methods every month. There is a "change cap" limiting how much payments can vary in a year.

• Interest-only ARM
For a period of time, you pay only interest, and do not pay down the principal.

• Convertible ARM
An ARM that can be converted to fixed rate after a period of time.

Assumable Mortgage
An adjustable-rate loan, the balance of which can be assumed by a home buyer.

Balloon Conforming Mortgage
Interest rate is fixed for a period of time, but the principal is not completely amortized. For the remainder of the term, it adjusts to a new fixed rate determined by the Fannie Mae net yield index plus the margin. 30-yr. term

Veteran Administration Loans
A zero-down loan offered to veterans only, the VA guarantees the loan for lenders.

Federal Housing Administration Loans (FHA)

Government-subsidized loan with low down payment (i.e., as little as 1-3%) and closing fees included; the government guarantees the loan.

Reverse Mortgage
A loan to elderly homeowners who need to borrow against the equity of a home while still living in it. The debt does not need to be repaid until the house changes hands. Interest is commonly one-year treasury rate, plus a margin and a cap on a rate change.

Buying a home whether it's the first time or second can be a very mind bogging process. A1 Mountain Realty can guide you through every step of the process by providing you with information that can be useful in the home buying process. This article provides you with information on types mortgage loans out there. The agents Ellen Phipps and Gwen Hoover are very experienced and knowledgeable in every aspect of North Carolina Real Estate. Whether you are looking for a NC Mountain Getaways or Log Homes for sale in North Carolina they can assist you. Call A1 Mountain Realty today at 336-846-4900 to speak to any one of our real estate agents. Take a look at all of our properties or you can do a MLS search from our website www.a1mountainrealty.com … while on our site be sure to check out Downtown West Jefferson and the towering Mt Jefferson by clicking on the webcam tab.

Information gathered from Zillow.com
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