What are the different types of home loans? These days, the economy is very unstable. The thing is that even with this economy we would still like to own houses to live in and places where we can build our families. This is why even with the tight economy we get home loans to be able to afford getting houses. This is why more types of home loans are being made available to us today.
The first types of home loans are the fixed interest home loans. These are the types of home loans wherein the interest rates that you pay are fixed the entire time you have your home loans. The monthly payment that you give is divided into the principal of the home loan you got and the interest rate. However, the interest rates get the bigger parts especially during the first couple of years.
The second types of home loans are called adjustable rate home loans. These are the types of home loans where the interest rates that you pay can change annually. Therefore, the amount that you pay for the home loan will differ over time. It doesn’t always mean that it will go up, though. Sometimes, the monthly payments go down as well.
There are types of home loans that combine fixed rate and adjustable rate home loans. This is called hybrid home loans. For a certain amount of time, you will be paying a fixed interest rate. Then after this specified time, the interest rates become adjustable.
Then we have the conventional types of home loans. These are the home loans that are not in any way, insured by the government. These are home loans that are commonly made by the private sector. There is not even government backing in these types of loan.
Government loans, on the other hand, are types of home loans that are backed up by the government. They are insured by the federal agency. The main advantage of this type of home loan is that it can be made by the private sector as well. Although the government supports it still. There are three main types of government loans, the FHA loan, VA loan, and the USDA loans. The FHA loans are made by the lenders from the private sector. They are insured by the FHA or the federal housing administration. Here, if the borrower is not able to pay, the FHA pays the lender. VA loans are home loans that are reserved and meant only for the people in the military. The government sector that manages this loan is the department of Veteran affairs, VA. Most of the times, the loan is the one used to pay for the entire amount of the house. Lastly, we have the USDA loans. These are loans that are managed by the US department of agriculture. These are the types of home loans that are reserved for people who reside in specific parts of the country. Most of the time, the USDA loans are also called farmer loans because of this.