A Step Closer To Owning A House: Basic Types Of Mortgage Loans

Part of the American Dream has always been to own a house

, either somewhere in the suburbs, at the edge of a small lake, or even in the heart of a big city. It is perhaps not surprising that many have dreamt of owning a house since childhood. After all, shelter is one of the basic necessities of man. A house is more than just a place to live in, as it also protects us against the forces of nature. If youre planning to purchase a house at one point, then you must understand what mortgage Washington DC residents have is.

Mortgage refers to a loan on a house or real estate property. A mortgage allows an individual to make payments in the form of installments within an agreed upon period, usually from 15 to 30 years. There are several types of mortgages available and you need to be familiar with them before committing to a particular one. Here are common mortgage loans that you may want to consider.

Adjustable-Rate Mortgage (ARM)

This type of mortgage has an interest rate that changes over the length of the loan. The reason for the fluctuating interest rate is that the interest is tied to an index. The interest rate may rise or fall within the payment period, meaning that your monthly payment may change as well. With its fluctuating nature, one may consider applying for an ARM as dangerous. However, when interest rates plummet, this can result in lower payments, thus enabling individuals to save more money.

Fixed-Rate Mortgage

This type of mortgage Washington DC lenders offer carries the same interest rate for the entire payment period of the loan. Many homeowners settle for a fixed-rate mortgage because it makes budgeting easier every month. Additionally, it protects homeowners against inflation. Fixed-rate mortgage is available in 15- to 30-year terms.

Hybrid Loans

This type of mortgage is a combination of an adjustable-rate mortgage and a fixed-rate mortgage. It has an interest rate that is locked for a certain period of time, which is often between 3 and 7 years. The main perk of hybrid loans is it gives homeowners a lower interest rate than fixed-rate loans and lower risk than ARMs.

When applying for mortgage Washington DC residents want to have, take time to look around for the best loan package. Contact lenders and brokers in your area and get help in finding loans with the best rates and lowest closing costs. See to it that you do not end up paying higher than what youre earning.

by: Darius Degross

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