Thirty (30) Year Fixed Rate Mortgage
The traditional 30-year fixed-rate mortgage has a constant interest rate and monthly payments that never change. This may be a good choice if you plan to stay in your home for seven years or longer. If you plan to move within seven years, then adjustable-rate loans are usually cheaper. As a rule of thumb, it may be harder to qualify for fixed-rate loans than for adjustable rate loans. When interest rates are low, fixed-rate loans are generally not that much more expensive than adjustable-rate mortgages and may be a better deal in the long run, because you can lock in the rate for the life of your loan.
Fifteen (15) Year Fixed Rate Mortgage
This loan is fully amortized over a 15-year period and features constant monthly payments. It offers all the advantages of the 30-year loan, plus a lower interest rate—and you’ll own your home twice as fast. The disadvantage is that, with a 15-year loan, you commit to a higher monthly payment. Many borrowers opt for a 30-year fixed-rate loan and voluntarily make larger payments that will pay off their loan in 15 years. This approach is often safer than committing to a higher monthly payment, since the difference in interest rates is not significant.
Hybrid ARM (3/1 ARM, 5/1 ARM, 7/1 ARM)
These increasingly popular ARMS—also called 3/1, 5/1, 7/1, or 10/1—can offer the best of both worlds: lower interest rates (like ARMs) and a fixed payment for a longer period of time than most adjustable rate loans. For example, a “5/1 loan” has a fixed monthly payment and interest for the first five years and then turns into a traditional adjustable-rate loan, based on then-current rates for the remaining 25 years. It’s a good choice for people who expect to move (or refinance) before or shortly after the adjustment occurs.
Jumbo Mortgage
These programs are defined as loans that do not conform to maximum limits established by Fannie Mae or Freddie Mac. Those loans exceeding $417,000 in the state of Texas are known as Jumbo Loans, Non-Conforming Loans, or Super Jumbo Loans. Typically these loans are written for your higher cost homes, which equate to higher loan limits.
VA Mortgage
A VA mortgage is any mortgage provided by a lending institution to an eligible veteran of the U.S. Armed Forces and guaranteed by the Department of Veterans Affairs. If a default occurs, the government would repay 25 percent of the loan to the lender. A VA mortgage requires no down payment. The loan is 100 percent financed at a fixed rate.
FHA Mortgage
A mortgage issued by federally qualified lenders and insured by the Federal Housing Administration (FHA). FHA loans are designed for low to moderate income borrowers who are unable to make a large down payment. FHA loans allow the borrower to borrow up to 96.5% of the value of the home. The 3.5% down payment requirement can come from a gift or a grant, which makes FHA loans popular with first-time buyers.
