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Definitions:
Mortgage - In casual use, a sum of money borrowed to purchase a home at a certain interest rate using the property as collateral. In formal use, a mortgage is the legal document that pledges property as collateral for a loan.
Fixed-Rate Mortgage - With a fixed-rate mortgage, your interest rate stays the same for the term of the mortgage, which is usually thirty years. Your principal and interest payment remains stable, making it easier to plan a monthly budget. However, initial interest rates tend to be higher than with other types of loans.
Adjustable-Rate Mortgage (ARM) - With an ARM, your interest rate and monthly payments start out lower than with a fixed-rate loan, but your rate and payments can change either up or down, depending on where interest rates in general are going. (If they're going up, your monthly payments will probably go up as well, sometimes significantly.)
FHA-Insured Mortgage - In this type of loan, the Federal Government insures the lender against loss in case the home buyer defaults on the loan. This program was set up so that Americans who can't afford the 10% to 20% down payment required by most lenders can still buy a home. Many HUD homes can bought with FHA-insured mortgages, which allow you to purchase the home with as little as 3% down. You do not have to be a first-time buyer in order to qualify for an FHA loan.
VA Loan - Under this program, the Department of Veterans Affairs guarantees the lender against loss. HUD homes may be purchased with a VA loan or any other loan.
Assumable or Non-Assumable - You may find a home with a mortgage loan you can "assume" from the previous owner. This means that the lender is willing to transfer the old loan on the home to you. These loans can be wonderful bargains, and the paperwork is usually not very complicated. However, watch out for fees that the lender may charge in order to do the transfer. These fees may offset any savings you might think you are getting by assuming the current financing.
Mortgages (loans) are as different as apples and oranges!
Just as there is more than one kind of home, there is more than one way to finance it. Mortgage lenders have come up with many different methods of helping you finance the purchase of your home, and each one has its own advantages and disadvantages. You must really study each loan carefully! You should seek the advice and counsel of your tax, financial, legal or other appropriate professional to help you determine which loan program is right for you.
Are you going thru HUD? Read this:
First of all, you should know that HUD itself does not provide financing. You can obtain financing through a bank or mortgage lender. And since many HUD homes are eligible for FHA-insured mortgage loans, this often makes financing easier to obtain. However, you are not required to get an FHA loan to buy a HUD home.
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