Potential home buyers have options when it comes to choosing the type of loan they seek from mortgage companies. Each type has its own unique advantages and disadvantages. Consumers should research the various options and choose the type of loan that suits their individual needs.

A fixed rate loan offers terms with a consistent interest rate for the life of the loan. The borrower pays equal monthly payments for the entire term with interest payments front-loaded. This means that over the first few years, a smaller portion of the monthly payment is applied toward the principal. Homeowners have an easy time budgeting for this type of loan but if interest rates fall, they are stuck with the higher rate.

Adjustable rate loans usually offer lower interest rates at the beginning but they fluctuate after that. The rate continually adjusts with a cap on the total amount it can change. Rates fluctuate according to an index based on what it costs the lender to borrow on credit markets. If a lender’s interest rate increases, the lender passes the increase on to the consumer.

Federal Housing Administration loans are often the best options for first time home buyers. Requirements for qualifying are easier and the lender offers low closing costs and a low down payment. Because they are easier to qualify for, the loan amounts are usually limited.

VA loans are similar to FHA loans with restrictions on how much the consumer can borrow. These loans are guaranteed for active duty military personnel, surviving spouses, and veterans. The lender offers low interest rates and small down payments.

Additional options include balloon mortgages, reverse mortgages, and interest only loans. Experts working for mortgage companies can offer more information about loans and the various criteria and terms. Consumers can speak to these professionals about their options and decide what type of mortgage best suits their individual needs.

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