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Keller Williams First Atlanta
200 Glenridge Point Pkwy
Suite 100
Atlanta, GA 30342
9866
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Adriana West (Keller Williams First Atlanta): Real Estate Agent in Roswell, GA
Minority Business Enterprise Certified

Types 0f Mortgages

The majority of US home buyers finance their homes with mortgages, typically 30 year fixed-rate loans.  Many other mortgage products are available, however, to serve differing nborrower needs and circumstances.

  • Interest-only Loans: borrower pays only the interest for a fixed period of time, usually five to seven years.  At the end of that therm, the borrower must pay the balance in a lump sum or start paying off the principal.
  • Buydown Mortgage: offers an initial discounted rate taht gradually increases to an agreed-upon fixed rate, usually within one to three years.  An initial lump sum payment reduces monthly payments in the first few years of the mortgage.
  • Graduated Pauyment Mortgage (GPM): offers low initial payments that gradually increase at predetermined times, which allows the borrower to qualifiy for a larger loan amount.  Negative amortization occurs in teh early years of the loan, but payoff of the principal excelerates during later years.
  • convertible Adjustable Rate Mortgage: Option to convert to a fixed rate mortgage at designated times, usually within the first five years on a specified adjustment date.  The new rate is established at the current market rate for fixed rate mortgages.
  • Fixed-Period ARM: starts out with three to ten years of fixed payments.  At the end of the fixed period, the interest rate adjusts anually.  Fixed period ARMS are often tied to the one-year Treasury Securities Index and have a first-adjustment cap.
  • Two-step mortgage: offers a fixed rate for a time period, usually five to seven years, after which the interest rate chagnes to a current market rate.  After this one time adjustment, the mortgage maintains the new fixed rate for the remaining term.
  • Option adjustable rate mortgage (Option ARM): targeted towards those with variable incomes, such as teh self-employeed and those who receive large year-end bonuses.  Unfortunately, buyers could also use option ARMs to buiy “more house” than they could otherwise afford; in these circumstances, borowers can face default if interets rates rise.

The determining factors are chiefly the length of time the borrower plans to own the property and the amount of monthly payment that is affordable.  As a result of the 2008-9 economic downturn, lenders have tightened lending criteria and loan qualification is subject to increased scrutiny.  While down payment amounts vary with the loan program, many lenders require 20 percent down to eliminate the need for Mortgage Insurance.  Federal Housing Administration (FHA) loans have gained prominence in the market due to their low down payment requirements.