San Antonio REALTORS - Common Mortgage Options
Like homes themselves, mortgages come in many sizes and types. The type of mortgage
that's right for you depends on many factors, such as your tolerance for
risk and how long you expect to stay in your home. Here are some
characteristics of various popular types of mortgages.
| Conventional Fixed Rate Mortgages |
Adjustable Rate Mortgages (ARMs) |
- Low risk
- 10- to 40-year terms
- Interest rate doesn't change
- Large down payment (compared to government mortgages) may be required
- Payment remains the same
|
- Higher risk
- Initial interest rate often lower than conventional fixed rate mortgage
- Interest rate may go up or down
- Interest rate usually adjusted annually
- Rate adjustments may be limited by cap(s)
- Payment caps can result in negative amortization in periods of rising interest rates
|
| Government Mortgages |
Hybrid Adjustable Rate Mortgages (ARMs) |
- FHA, VA, or bond-backed
- Interest rate sometimes lower than conventional fixed rate mortgage
- Variety of programs available
- Low down payment requirements
- Liberal qualifying ratios
- Attractive to first-time homebuyers
- Higher insurance costs may apply for FHA loans
- Payment remains the same
|
- Higher risk
- Initial interest rate often lower than conventional fixed rate mortgage
- Fixed term for 1-10 years, then becomes a 1-year ARM
- May have option to convert to a fixed rate mortgage before becoming a 1-year ARM
- Interest rate may go up or down
- Rate adjustments may be limited by cap(s)
- Payment caps can result in negative amortization in periods of rising interest rates
|
| Jumbo Loans |
- Any loan over $417,000 (2006 figure, up from $359,650 in 2005) for a single-family home or condo
- Size of loan increases lender's risk, so interest rates are generally higher than for conventional fixed rate mortgages
- Jumbo loans are not available with government mortgages
|
Some Less Common Mortgage Options
Sometimes the more common fixed or adjustable rate mortgages aren't
advantageous or aren't available because of your circumstances. Here are
some less common mortgage alternatives and their characteristics.
| Graduated Payment Mortgages |
Growing Equity Mortgages |
- Fixed interest rate
- Medium risk
- Low monthly payments increase over 5-10 years, then level off for remainder of term (usually 30 years)
- Initial low payments can result in negative amortization during early years of the loan
|
- Formalized prepayment method
- Medium risk
- Payments rise over 5-10 years, then level off for remainder of term
- Excess payment applied to principal
- Fixed interest rate usually lower than conventional fixed rate mortgages
|
| Balloon Mortgages |
Shared Appreciation Mortgages |
- High risk
- Low interest
- Short term (3-10 years)
- Large final payment
|
- Low interest rate in return for agreement to share appreciation of home value with lender upon sale or at a specified time
- Low monthly payments
- Medium to high risk; if value of home doesn't increase as expected, lender may charge additional interest
|
Seller-Financed Mortgages
| Seller-Financed Mortgages |
Wraparound Mortgages |
- Medium risk
- Seller acts as lender
- Terms are negotiated between you and the seller
|
- Medium risk
- Seller acts as lender
- Terms are negotiated between you and the seller
- Your mortgage payment repays both seller's original mortgage and any additional amount seller financed for you
- Interest rate higher than on seller's mortgage but often lower than conventional fixed rate mortgages
|
