Every year, thousands of people ask themselves the question of how to find the best home loan. Most people would agree that a home loan is one of the biggest investments the average consumer will make in a lifetime. Having the wrong home loan can be expensive, and it can even lead to foreclosure if the payments cannot be made on time. Understanding what the various types of home loans are is the first step to finding the best home loan.
In general, there are seven types of common home loans. There are, of course, unique hybrid loans which can be negotiated, but for the most part home loans will fall into one of these categories:
The Conventional Mortgage: This is a fixed rate loan through a commercial lender for a term of 15, 20, or 30 years. The commercial lender is usually a bank or a mortgage lender. The amount of the monthly payments, the interest rate, and the terms of the loan are locked in by the home loan contract. If the buyer does not have at least 20% for a down payment, these loans require private mortgage insurance, also known as PMI.
ARM or Adjustable Rate Mortgage: In many respects the ARM is similar to a conventional mortgage. What changes...
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