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Making Sense of a Mortgage

A mortgage can come in different shapes and sizes. Figuring out which one is right for you can be tough.

Buying a home is one of the biggest financial decisions that the average American will make in their lives.

Adjustable vs. Fixed

A fixed rate is exactly what it sounds like. Same interest rate, same monthly payment, for the whole term. 30 year fixed rate mortgage mortgage loans have the same interest rate for the entire repayment term. An adjustable rate has the flexibility to change after an initial time frame of the rate and payment being fixed.  in a 5/1 Adjusted rate mortgage the fixed rate is set for the first 5 year with the rate changing every year after that.

Government Loan vs. Conventional

The U.S. Government helps encourage home ownership through the Department of Housing and Urban Development through the mortgage insurance program call the Federal Housing Administration or FHA. FHA loans are available to all types of borrowers, not just first-time buyers. However mortgage insurance is required when using a FHA.

The Government also offers loans to through the Department of Veterans Affairs to the members of the military and their family. Both the FHA and VA loans are backed by the full faith and credit of the federal government. Unlike the FHA, VA Loans can offer complete financing for the buying a home, meaning no down payment.

A conventional home loan is one that is not insured or guaranteed by the federal government in any way. The main benefit of using a conventional loan is that you can avoid mortgage insurance entirely. If you make a down payment of 20% or more, you won’t have to pay for mortgage insurance. But if you put down less than 20%, you’ll have to pay for PMI. (Personal Mortgage Insurance)

Learn even more by visiting the Home Buying Institute for even more details and insights into mortgages and their ins and outs.