Financing Your New Richmond Home
With the real estate market dropping, now could be the perfect time to purchase a new house. However, you are still probably going to want to get a Richmond mortgage loan to help finance your home. Securing a low mortgage interest rate involves first choosing the type of mortgage loan which is right for you.
Richmond Banking Rates has put together a list of the most common types of mortgage loans. Consider which loan will fit your situation the best before purchasing your new home in Richmond, Virginia.
Fixed-Rate Mortgage – These loans offer a fixed interest rate. The most popular loan option, over 70% of loaners use a fixed-rate mortgage. Whatever the state of the market, the interest rate remains the same, providing many consumers with a sense of stability. The shorter the term of your loan, the lower your home mortgage rate will be, because the lender assumes less risk.
Adjustable Rate Mortgage – The interest rate on ARMs is tied to a changing index. Your interest rate changes over time as the index rises and falls. This index changes in accordance with the market, so if you are confident that the market will be falling soon, this may be the right loan option for you. Frequently, there are caps placed on the adjustment rates between payment periods, allowing the mortgage loan rate to only change a certain amount.
Balloon Loan – An interesting approach to home financing, this option is probably not for the first time buyer. Balloon loans provide a set fixed interest rate for a period of time, typically seven to ten years instead of the normal fifteen to thirty. At the end of the term, you have to pay the loan back in full. If you do not have the full amount of money to pay the lender, they can foreclose on your house.
Government Backed Loan – These loans, issued by the Federal Housing Administration, offer mortgages to low income families. They require smaller down payments and limit the fees which can be charged to the borrower. It also allows these borrowers to qualify for much lower interest rates than they would otherwise be able to manage.
Interest Only Loan – Similarly to a credit card, these loans offer the option of only paying the interest off every month. Principal is paid only when it is convenient for the lender. For borrowers with fluctuating incomes, this may be the best option. However, the interest only payment lasts only for a certain amount of time, usually five to ten years. Because these loans carry a higher risk for lenders, interest rates on these mortgages will frequently be higher.
Once you choose which type of mortgage loan is right for you, let Richmond Banking Rates help you find the lowest interest rates in your area.
