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Understanding The Various Mortgage Products

By Karen Godfrey

There are plenty of mortgage options available and deciding on one can be a difficult task. Take a look at these mortgage options and see which one fits your home purchase the best. If you are low or moderate income and considering buying a home, there are mortgages that will fit your needs as well.

Conventional Mortgage

This is a mortgage that is either a fixed rate or adjustable mortgage and the terms and conditions meet the criteria of Fannie Mae and Freddie Mac . Conventional mortgages are not insured by the federal government, and carry no guarantee to the lender, if the buyer defaults. A fixed rate mortgage has an interest rate that does not change, and the payment stays the same throughout the term of the loan. An adjustable mortgage has an interest rate that changes with the market, therefore your mortgage payment will change during the term of the loan.

FHA Mortgages

These are a type of federal assistance through the Federal Housing Agency (FHA). These mortgages give lower income families the opportunity to purchase a home. The history behind the FHA mortgage started during The Great Depression, during a time when foreclosures were on the rise, to provide lenders with insurance. Now the FHA mortgage typically helps new home buyers who have little to no down payment for a home.

Rehab/203k Mortgage

This is a mortgage that is designed to be used when purchasing a home that is going to be rehabilitated. It is meant to provide money not only for the purchase of the home, but also the cost of rehabilitation, inspections and six month's carrying costs. This loan is also insured by the FHA.

Rural Housing Service (RHS Loans)

This mortgage is insured by the USDA (US Department of Agriculture). This mortgage also allows low to moderate income families to purchase a home with no down payment. With this mortgage a guarantee fee must be paid by the buyer. The fee is typically 2% of the home purchase amount.

Consider all your options before making a decision. Do you have a down payment? What is your income level? Will the home need repairs? Calculate the costs of each one, before you commit to a particular type of mortgage.

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