What type of mortgage is best for me?
In a nutshell:
It depends on your financial situation, your lifestyle and your plans for the future. Even if you already have your financing in place, it’s good to understand the different types of mortgage loans available to buyers.
Fixed Rate - The most popular type of mortgage loan. Your interest rate stays the same for the duration of the loan, and you generally have the lowest payments. If industry rates go down & you have a long-term fixed-rate mortgage, you'll want to refinance with a better rate.
Adjustable Rate (ARM) - With this type of loan, interest rates can change yearly after an initial fixed rate period as the economy fluctuates, i.e. according to the value of one-year Treasury bills.
FHA Loans - A good option for those with high debt-to-income (DTI) ratios, which is the percentage of your monthly income that goes to paying your mortgage, loans, credit cards, & child support. 45% is generally the max DTI ratio, but FHA loans allow you to spend up to 57%.
VA Loans - Government-insured low-cost mortgage loans available to veterans, active-duty members, some reservists and National Guard members, and spouses of members who died in the line of duty. They require no down payment & include closing costs and earnest money.
Residential Bridge Loans - A short-term loan taken out that's backed by the property a buyer currently owns. It's used primarily by homeowners who want to trade up to a bigger house, but haven't sold their current home.
Rehab Loans - Commonly known as a “fixer-upper loan” & technically called an FHA 203k loan. It's designed to help buyers finance older homes that need major repairs.
Friends and Family Mortgages - When you borrow money from family or friends to buy a house. Due to the lender’s close relationship with the buyer, you'll normally get lower interest rates.