When you want to buy a house in the United States, the following types of mortgages are generally used, depending on the situation and interest rate.
I. Fixed Expected Annualized Rate Mortgage
The expected annualized interest rate on this type of mortgage does not change over the life of the loan. Whether you choose 10, 15, 30 or 50 years, the expected APR is the same. This is a very common choice because homeowners can predict how much they will pay, don’t have to worry about different fees or inflation, and because the mortgage payments are the same every month, it’s easy to set a long-term budget.
If at the beginning, when buying a home, you choose to put down 20% of the price of the home, you will not be charged for home insurance, which can save you a significant amount of money ($5,000-$8,000). For home insurance, you can choose to pay it all at once on the day of closing, or you can choose to pay it off every month.
Another option is that you can choose to have the bank you took out the loan from pay it for you, but you will have to bear a relatively high APR.
II. Variable APR Mortgage
A variable APR mortgage has monthly payments that are adjusted every so often based on the APR and market trends. This type of mortgage usually offers a lower APR at the beginning and is easier to get approved for. This results in higher mortgage payments over the life of the loan, so this type of mortgage is considered higher risk.
Most of these mortgages have a cap on the expected APR, so you know the maximum amount you may have to pay each month. When choosing this type of mortgage, you should make sure that you can afford the monthly payments even if the expected APR reaches the cap.
III. Federal Housing Administration (FHA) Loans
FHA loans are guaranteed by the government and allow buyers who do not qualify for a mortgage to get a loan with a small down payment. First-time homebuyers often find FHA loans ideal because it is easier to meet the requirements. The minimum down payment is *** of the home price, and the government-mandated homeowner’s insurance is relatively high, requiring not only monthly payments, but another (up front fee) at the time of closing. However, the expected annualized interest rate is relatively low.
Department of Veterans Affairs Loans
Government loans are available for spouses of veterans and fallen service members, and the rules vary depending on the number of years in the military and how they were discharged.
The biggest benefit is that the homeowner does not need to make a down payment, but the loan amount may be limited. In fact, most Chinese investors or ethnic Chinese need very few U.S. veterans loans, but you can learn through this loan that the U.S. government gives many good benefits to military personnel, such as no down payment, 100% loan, and many other fees are reduced, and the expected annualized interest rate is extremely low.
V. Interest-only mortgage
This type of mortgage has a period of monthly payments that are interest-only and the expected annualized interest rate can be fixed or variable. At the end of the interest-only period (usually five to ten years), the homeowner’s payments can increase significantly, as both principal and interest are included.
This type of mortgage offers low overhead when a home is first purchased, with the opportunity to refinance later