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Mortgage abroad

For most people buying a home will be their most expensive purchase and their most complicated purchase. Unfortunately most first time home buyers do not understand the types of mortgages available. Having a good understanding of the mortgage types available and figuring out which mortgage is appropriate for you us a must before buying a home.

Home buyers (mortgagees) obtain a loan to purchase a home. Most loans are originated at a bank, credit union or mortgage company. These financial institutions are mortgagors. Sometimes the seller of the home provides the buyer a loan. A good place to start the process for finding a mortgage is online. There are many websites that allow you to comparison shop mortgage rates.

Home loans are available in fixed rate form and adjustable rate form. With a fixed rate loan the mortgage rate stays the same for the entire life of the loan. With adjustable rate mortgages the interest rate is fixed for a period of time then adjusts every year after.

The most popular type of mortgage loans are fixed rate loans because the borrower knows what their rate will be and what their monthly mortgage payments will be. The rate and monthly payment will never change. Please note the total monthly payment of a fixed rate loan can change because the payment also includes local taxes and insurance.

Of fixed rate loans the most popular by far are 30 year fixed mortgages. When you spread payments out over a thirty year period the monthly payments become a lot more affordable. The second most popular type of loan are15 year fixed rate loans. The monthly mortgage payments are higher with a 15 year loan but you save a ton of mortgage interest over the life of the loan. You also own your home outright in half the time.

There are two types of fixed mortgages, conforming mortgages and jumbo mortgages.

Conforming mortgage loans also known as conventional mortgages, are mortgages that meet certain criteria set out by Federal Housing Finance Agency (FHFA). There is a maximum dollar mortgage loan limit set for each county in the United States. Higher mortgage loan limits are set for high housing cost areas. Mortgages that conform to the standards are purchased by government sponsored entities (GSE) like Freddie Mac and Fannie Mae. The process guarantees banks, mortgage companies and credit unions are able to resell home mortgage loans that they make enabling them to make more loans by freeing up capital.

Jumbo mortgage loans are for home loans that have a dollar amount higher than conventional loan amounts. Since the government isn't a ready buyer for jumbo loans jumbo rates are higher than conforming rates. Jumbo rates are higher because third party investors demand a higher premium because of the extra risk of a jumbo loan.

Adjustable mortgages have a fixed rate period and then the mortgage rate adjusts every year after. The most common are 5/1 adjustable loans. With a 5/1 loan the rate is fixed for the first 5 years and then adjusts every year after. Other common adjustable loans include,1 year, 3/1, 7/1 and 10/1. There are yearly caps and lifetime caps on how much the rate can adjust.