Real Estate Loan
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A real estate loan can come in all shapes and sizes. Home buyers, including first-timers, will be surprised at the real estate loan programs they can qualify for. Even property investors who want a fast loan for a quick turn-around on an investment property can qualify. Potential buyers can check out the many types of lending that will enable them to take out a mortgage and pay it off quickly. No matter what the reason or the type of mortgage, home buyers should have a solid foundation. "The conies are but a feeble folk, yet make they their houses in the rocks" (Proverbs 30:26). Understanding each type of mortgage will help buyers determine the right choice for their home purchase.
Real estate loans come in two types: FRM and ARM. A fixed rate mortgage (FRM) has a fixed interest rate that won't change over the life of the loan. This is an advantage to people who plan on living in their home for seven or more years. They can have the security of knowing that the interest rate will not change and they can budget accordingly. An FRM carries lower risk and is good in times of rising interest rates.
An adjustable rate mortgage (ARM), on the other hand, has an interest rate that will change up or down with the federal Prime Rate. Although the borrower loses some security in not knowing what the interest rate will be in the future, normally ARMs are lower than FRMs. So if the home buyer is planning on selling their real estate purchase within a short period of time, an ARM might be best. ARMs also include interest only mortgages, which some people prefer because this allows for the lowest possible payment.
Home buyers can also find no down payment real estate loans. Although the monthly payments are larger with no down payment, it can help consumers get into a home much quicker than if the consumer had to pay a 20 percent down payment. Interest only real estate loans are good for investors and those who want to have a flexible mortgage payment plan. With interest only real estate loans, consumers decide how much they want to pay each month. Home buyers can pay only the interest or any combination of the interest plus the principle. If you are planning on paying off your loan early, an interest only real estate loan might be to your advantage.
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