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Types of mortgage loans - Compare and choose the best option

Posted on: 08th Dec, 2005 08:23 pm
The mortgage industry offers a variety of loan programs suitable for a wide range of borrowers. There are loans that require high payments but there are also programs specially developed to provide homeownership opportunities to low-income families. These mortgages have special features and one really needs to get a brief idea of their pros and cons before he applies for it.

This section provides you with an explanation of mortgage types and their features. Apart from highlighting the types of mortgage loans, this section also mentions who all are suitable for the different types of mortgages. The purpose is to help you explore the features of various types of mortgage loans so that you can compare and choose the one that's best for you.


Types of mortgagesFeaturesEligible Borrowers

Fixed rate mortgage
(40, 30, 15, 10 years)
Fixed rate of interest and hence fixed Monthly payments throughout the loan term.
  • Borrowers who are planning to occupy the property for at least 10 years.
  • Those who don't prefer higher payments.

10/1 year ARM

Interest rate and the monthly payment remain the same for 10 years. From the 11th year, the rate is adjusted every year. This will change the payments each year for the rest of the loan term.
  • Intend to occupy the property for more than 10 years.
  • Like to make stable payments initially but can afford higher payments later on.
    OR
  • Plan to leave the property within 10 years.
  • Want to continue with the loan even if there are changes in the plan.

7/1 year ARM

Interest rate and monthly payments remain fixed for the first 7 years. From the 8th year, interest rates are adjusted every year. The payments are thus changed every year till the loan period is over.
  • Plan to stay in the property for more than 7 years.
  • Prefer stable payments initially but can keep up with higher payments later on.
    OR
  • Plan to vacate the house after 7 years.
  • Want to carry out with the loan in case the plan changes.

7/23 (2-Step)

Fixed rate and monthly payments for first 7 years. On the 8th year, the interest rate is adjusted according to prevailing market rates. The resulting payments will remain constant for the remaining loan period.
  • Plan to occupy the property for more than 7 years.
  • Those who can afford just 1 payment adjustment.
    OR
  • Those who plan to move out within 7 years.
  • Those who want to continue with the loan in case there is any change in the plan.

5/25 (2-Step)

Interest rate and monthly payment remain the same for the first 5 years of the loan period. The rate is adjusted on the 6th year to reflect the prevailing rate. The resulting payment remains constant throughout the rest of the loan term.
  • Borrowers intending to stay in the property for more than 5 years.
  • Those who can bear with one payment adjustment
    OR
  • Borrowers who plan to move within 5 years.
  • Those who want the loan to remain in force in case of any change in the plans.

5/5 and 5/1 year ARM

For the first 5 years, the interest rate and monthly payment remain constant. But from the 6th year, the rates adjust after every 5 years and 1 year respectively.
  • Those who can put up at the property for more than 5 years.
  • Borrowers who like stability in monthly payments initially although there may be increase in payments later on.
    OR
  • Those who may leave the house within 5 years.
  • Borrowers who want to continue with the loan in case plans change.

3/3 and 3/1 year ARM

The interest rate and monthly payments remain fixed for the first 3 years. From the 4th year, the rates are adjusted in every 3 years and 1 year respectively.
  • Borrowers who plan to stay in the property for than 3 years.
  • Those who can accept initial payment stability and any changes later on.
    OR
  • Borrowers willing to abandon the property in less than 3 years.
  • Those who want the loan to remain in force in case of any change in the plan.

1 year ARM

The interest rate is adjusted every year as a result of which the monthly payments also vary each year for the entire loan term.
  • Borrowers who want to take advantage of low rates.
  • Those who can bear additional costs due to yearly payment changes.
    OR
  • Borrowers who cannot qualify for high rate loan programs.

5 year Balloon Mortgage

Interest rate and monthly payments remain unchanged for the first 5 years. After 5 years, the borrower must refinance the loan (which is largely due) at the prevailing rates.
  • Borrowers who plan to occupy the residence for more than 5 years.
  • Those who can refinance their previous loans at the prevailing market rates.
    OR
  • Those who intend to vacate the property within 5 years.
  • Those who like stability in payments.

7 year Balloon Mortgage

Interest rate and monthly payments remain fixed for 7 years. At the end of 7 years, the borrower should refinance into a new loan at the prevailing market rates.
  • Borrowers who want to live in the property for a time period exceeding 7 years.
  • Those who can refinance at the available market rates.
    OR
  • Those who are planning to move out of the property within 7 years.
  • Borrowers who prefer payment stability.

Related Articles
where can i find the one i can get time's running out for me.. i am a student and get money for school but not to live? i have ruined my credit in the past but i need a mobile home now.. my parents are letting me use a place for the home so i don't need no land..
Posted on: 20th Jan, 2009 07:24 pm
Posted on: 21st Jan, 2009 12:13 am
We would like to take out a mortgage on a mobile with land. The mobile is already set up (single wide)
What are the best rates put there.
Posted on: 29th Jan, 2009 05:36 pm
Hi KJT,

If the mobile home has a permanent attachment with the land, then you may look for mobile home loans. But remember that before approving the mobile home loans, the lender will check your credit score and income history. The rates you may receive will also depend upon your credit score.

You may check out with the local lenders offering mobile home loans and get an idea of the type of rates they are offering. You can also seek a no obligation free mortgage consultation from the lenders of this community. This will give you an idea of the type of rates and terms you can expect to get.

Thanks,

Jerry
Posted on: 30th Jan, 2009 01:08 am
is there anyone out there that will finace a 1982 mobile home in a park
Posted on: 14th Feb, 2009 07:07 am
Welcome eric,

If the mobile home has a permanent foundation and if you have a good credit score and income, then I don't think you will face problems in getting a loan. You can contact the lenders of your area and check what types of rates and terms you can get.

You may also speak to the lenders of this community and seek a no obligation free consultation from them. This will help you to know the rates and terms you may expect to get.
Posted on: 16th Feb, 2009 12:47 am
I am a graduate student at Iowa State University so that means limited income and student loans. I have a debt to income ratio of 56% so I am having trouble finding a mobile home loan even though my credit is good. Suggestions?
Posted on: 21st Feb, 2009 06:51 pm
Welcome Lhuntimer,

As far as I can understand, your debt to income ratio is too high. As a result of which it will be difficult for you to get a loan. In order to get conventional mortgage, you will require a debt to income ratio of 28/36 and for FHA you would require 31/43.
Posted on: 22nd Feb, 2009 11:34 pm
We live in a double wide on 5 acres, the land is free and clear, is it possible
to get a loan to pay off credit cards against the land, we have lived on the land for 20 years
Posted on: 04th Mar, 2009 10:58 am
Hi cc

You can get a land loan provided if your credit score and income is good. However, I think it would be better if you could go for a debt settlement plan or a debt consolidation program. In debt consolidation, the interest rates for paying your credit card debts will be reduced whereas in debt settlement, your payments will be reduced by 40%-60% depending upon your financial situation.

Thanks.
Posted on: 05th Mar, 2009 12:38 am
I need to refinace my mobile home because i'm paying 14 1/2 percent I live in a mobile home community? Where can i get a laon??
Posted on: 05th Mar, 2009 12:51 pm
hi chef,

you can get your mobile home refinanced provided if there is equity in the property. moreover, you should have a good credit score and income in order to qualify for the loan. apart from this, the mobile home should have permanent foundation. you can speak to the local banks, lenders, mortgage companies or brokers for loans to refinance mobile home. to know more about mobile home loans, check out the following link:
http://www.mortgagefit.com/mobile-homeloan.html

take care.
Posted on: 06th Mar, 2009 12:50 am
I have a friend that I work with who is selling her mobile home. She is selling it for a low price and I really would like to buy it and actually own something. I just filed bankruptcy so I am not sure if that is going to have a negative impact on getting a loan. She is selling the mobile home for $5000.00. I have done a lot of figureing and I can save more money by purchasing the mobile home then renting at $618.00 a month. I just wanted to know if there are any loan companies that would help me out or if it is a lost cause? Thanks
Posted on: 29th Mar, 2009 07:25 pm
hi emmylou!

welcome to forums!

you have mentioned that you have just filed for bankruptcy. in that case, it would be difficult for you to get a mortgage. if you have filed chapter 7, then you need to wait for 2 years after the discharge to get a fha loan and 4 years to get a conventional loan. if you have filed chapter 13 bankruptcy, then you would have to wait for a year after the discharge to get fha loans and 2 years to get conventional loans.

feel free to ask if you have further queries.

sussane
Posted on: 29th Mar, 2009 08:57 pm
my wife and I have about 499/498 credit score but most of the problem is a repeat on the credit or things saying charge off but have been paid and we have a title! but we are wanting to buy a new mobil home is there any financing avil. in the State of Texas?
Posted on: 03rd Apr, 2009 09:27 pm
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