Obtaining a mortgage loan to buy a home for the first time is a real eye-opening experience for a lot of consumers. You never really see just how many different loan programs there are to help you buy a home until you start getting into the process of shopping for the best mortgage options. The more you know about some of the loan types you run across, the better you will feel about making an educated choice. Take a look at some of the different types of mortgage loans you may encounter through the home-buying process.
Conforming Mortgage Loan
A conforming mortgage loan is just a fancy way of saying that the loan terms are in line with industry standards set forth by larger lending operations. Conforming mortgage loans tend to have interest rates that fall in line with most large lenders and repayment terms that are fairly similar. Conforming mortgage loans are perhaps one of the most common loan products that home buyers seek when they are ready to purchase a home.
Full-Service Wholesale Mortgage Loan
Wholesale lenders do not offer loans directly to the person buying a home; they actually extend their loan services through third-party loan servicing companies. If the mortgage is handled fully by that third-party servicer, you have obtained a full-service wholesale mortgage loan. There are both advantages and disadvantages to this kind of arrangement. For one, wholesale loans can have a bit of a markup compared to retail loans, which come directly from the lender, because the third-party servicing agency has to make money on the arrangement as well. One of the advantages is that third-parties may pick up some of the risks of lending to people with lower credit scores.
Balloon Mortgage Loan
A balloon mortgage loan is not typically a preferable type of loan for most lenders, but it can be used for buyers in the real estate industry. With a balloon mortgage, you only have to pay interest on the loan for a certain time frame, and at the end of that time frame, the full balance is due for repayment. For example, say you borrow $100,000 to buy a home with a balloon mortgage. You may be required to pay the loan payments (with interest included) for a total of five years. At that time you have paid $20,000 toward the principal balance and the rest of the loan amount ($80,000) would then be due for repayment.
To learn more about loan programs, contact a company like Secure One Capital today.