Learning Center: Popular Loan Products at a Glance
Learn about the major choices because one kind of mortgage is the best fit for you.
In our Fundamentals series, Rate Simple breaks down loan concepts for ordinary people.
Borrowers come in all shapes and sizes, and for every type of homebuyer or refi customer there is likely going to be one loan product that fits him or her best. Choosing the right loan requires understanding the options and the kind of customer they cater to.
See If You QualifyWhen it comes to mortgages, one size does not fit all. Many factors are at work, and that's where we come in. Let us help you pick your next, best loan. In this article we explain the following categories.
- Conventional
- Fixed vs. adjustable
- Interest only
- Cash-out refinance
Conventional Mortgage
The most popular loan is the 30-year fixed-rate mortgage. Payments spread out over that many years are lower, and the fixed rate means the payment never changes. If you have good credit and a steady job history, plus 3% for a down payment, a conventional mortgage is a good fit. (Terms other than 30 years also available.)
Fixed vs. Adjustable Rate
An adjustable-rate mortgage starts with a fixed rate for a period of time, then varies. The rate can go up or down, and it can adjust as seldom as every year or as frequently as every month. Lenders dangle lower initial rates as a come-on, but you can negotiate to lock in the rate for as long as 10 years. You trade the predictability of a fixed-rate loan for lower initial payments. If you step into an adjustable-rate mortgage with your own adjustment strategy in mind—to sell the home before the rate adjusts, or to trust that the rate then will be lower—you can reap the advantages of this type of loan.
Interest Only
Hello, house flippers! With an eye toward selling the home after a short time, you should know about interest-only mortgages. For a set period of time your payments go only toward the interest, satisfying the bank. "But what's in it for me?" you wonder. Home ownership as a cashflow generator. This is not the type of loan for you if you think you'll be tempted to keep the home. Qualifications vary be lender but generally have two things in common: very good credit and strong finances.
Cash-Out Refinance
A homeowner who has built up equity can convert some of it to cash by replacing one loan with another. The new loan rolls together what you currently owe on the home plus the new cash. Smart uses for this money include home improvements to raise value, and paying down credit card debt because the interest charged by credit cards is probably much higher than the interest on the mortgage.
See If You QualifyTakeaways
- Rate Simple offer many types of loans so that borrowers can find the best fit.
- At Rate Simple we strive to match you with the right product for your needs.
- With our service you can arm yourself with information before talking to potential lenders.
