There are several kinds of mortgage loans, and variations of those loans, with varying mortgage interest rates. If you’re shopping for a loan with a great mortgage rate, deciding what type of loan you should apply for beforehand can save you time.
Mesa Banking Rates has compiled a list of many different mortgage loan types. Consider whether you fall into a specific category that may help you find more favorable loan terms before committing to a mortgage rate on your next home purchase:
Fixed Rate Mortgage: A fixed rate mortgage loan is exactly that – fixed. The interest rate never changes, even if the economy takes a downturn. Your mortgage payment will remain the same for the entire term of your loan.
Adjustable Rate Mortgage: Adjustable rate mortgages differ from their fixed rate counterparts because the interest rate rises and falls over time. Your loan rate is determined by comparing it with average interest rates set by a defined index.
40-Year Mortgage: These mortgage loans have made up a very small percentage of total mortgages, but are becoming more popular. With the rise in interest rates, borrowers are turning to the 40-year mortgage as a way to lower their interest payments. A 40-year mortgage can be fixed or an ARM, like a 20-20.
VA Mortgage: These mortgage loans are made available to American veterans and their surviving, unmarried spouses through the U.S. Department of Veteran Affairs. The VA determines the areas where these loans are offered as usually rural or small cities where housing credit is limited or unavailable. VA loans offer attractive loan terms such as low interest rates. Veterans may also finance a home purchase with no down payment required.
Interest Only Mortgage: The term “interest only” means the borrower only makes payments on the principal balance’s interest for a set amount of time. After this initial period, the loan is amortized for the remainder of the term.