Different Types of Oakland Park Home Loans
Are you trying to get a mortgage for your home? The process can be very tiring especially because of the entire lingo involved not to mention the ever-changing regulations that govern Oakland Park home loans. It can become confusing very fast trying to differentiate the difference between a conforming loan and an FHA loan. What does “FHA” stand for anyway?
Here is a breakdown of the different kinds of home loans you can expect to get in Oakland Park from NHL Lending.
Let us begin by defining a mortgage.
A mortgage is a legal contract that stipulates the financial obligations a borrower has to fulfill to the lender before getting back their title deed from the lender.
Now that we have that out of the way, let us look at the different kinds of home loans.
Adjustable Rate vs Fixed Rate Mortgage
There are many kinds of home loans but they all can be classified as either being fixed rate or adjustable. So, what’s the difference between these two?
Adjustable Rate Mortgage
Also known by the acronym ARM, adjustable rate mortgages are characterized by an interest rate that adjusts during certain periods. A different kind of adjustable rate mortgage that combines features of fixed rate mortgages and adjustable rate mortgages is referred to as a hybrid product. It is common for the interest rates of these kinds of home loans to adjust after remaining fixed for some time..
At NHL Lending, we offer both adjustable rate home loans as well as the hybrid product. Our hybrid product’s (5/1 ARM) interest rates are fixed for the first 5 years of the home loan and thereafter are adjustable.
Fixed Rate Mortgages
These kinds of home loans have the same interest rate for the entire term of repayment. This means that every year you can expect to pay the same monthly payments till you have completely paid all of your mortgages.
NHL has two types of fixed rate mortgages:
- 30-Year Fixed Rate Mortgage
- 15-Year Fixed Rate Mortgage
Each of these mortgage types has its own benefits. For instance, Adjustable-rate home loans have a rate cap they cannot exceed month to month or over the life of the home loan.
An adjustable rate home loan that is a hybrid is perfect if you do not plan to live in the new home for a long time. For instance, an ARM 5/1 home loan has a low fixed interest rate during the first five years. Thereafter it begins to adjust.
The ARM 5/1 would be perfect for young couples who do not plan to start a family immediately. They can move out of the new home within five years when their family size starts to grow.
On the other hand, the fixed rate loans remains the same for the duration of the loan and even though it might be expensive at the beginning, it becomes more affordable with time.
By getting a fixed rate loan especially one that is extended over 30 years, you will be making less monthly payments since your home loan repayment will be spread out over a long period.
Fixed rate home loans also offer flexibility for homeowners. Even some homeowners can finish paying off their home loan in 15 years, they take out the 30-year fixed rate mortgage just to make an allowance for any eventualities.
Conforming vs Jumbo Home Loans
Home loans can also be classified based on how much money is borrowed. Using this criterion there are two types of home loans:
- Jumbo Loan
- Conforming Loan
A conforming loan is any loan that meets the guidelines of a Government Sponsored Enterprise, that is, Fannie Mae and Freddie Mac. These two institutions transact in mortgage-backed securities, that is, they buy mortgages from lending institutions like NHL Lending and then sell them to investors on Wall Street.
They are referred to as conforming loans because they fall within the guidelines (comply with) established by the GSEs.
Conforming Oakland Park home loans need to be a maximum of $453,100 in order to qualify.
Jumbo loans as you can tell from their name are large home loans. Oakland Park home loans that are below $453,100 are treated as jumbo loans as that is the GSE minimum for Broward County. When applying for a jumbo loan you have to be prepared to make a larger down payment as well as have a very good credit score for the following reasons.
By understanding the various ways in which loans are categorized you are able to figure out which home loan you qualify for as well as which will be the most convenient for you both in the short or long term.
If you need help choosing, the right Oakland Park home loan do not hesitate to get in touch.