Types of Mortgages

Fixed Rate Conventional Mortgage: A conventional mortgage is a loan without a third-party participant, such as VA or FHA (we'll explain these in a minute). Fixed rate mortgages are paid off in equal monthly payments spread over 15, 20, or 30 years. The interest rates stay the same throughout the term of the loan. Each payment includes part of the interest and principal.	+ Advantage: Quick processing and predictable payments.
Adjustable Rate Mortgage (ARM): Not available with HomeSight's Purchase Assistance. Adjustable or variable rate mortgages have a fluctuating interest rate usually based on an economic indicator such as cost-of-funds index or Treasury bills. The rate may be adjusted each year or at an established time period such as every 2 or 3 years. Most ARMs set a maximum or "cap" on possible increases to the monthly payments and a "cap" on the rates over the life of the loan.	+ Advantage: Lower initial interest rates and monthly payments allow buyers to pay less in the early years while taking a risk that the loan's interest rate will fluctuate upward in later years. And buyers can often qualify for a larger loan.
FHA Loans: The Federal Housing Administration does not actually loan money. The FHA insures loans. They insure that the mortgage lender gets paid, no matter what. FHA-insured loans are available with fixed or graduated payments. Because the loans are insured, lenders often will accept lower down payments, as low as 2.25%. This makes them especially attractive to first-time homebuyers. Interest rates are usually lower because of FHA insurance. There are no pre-payment penalties, but lenders are allowed to charge points. An FHA point equals 1% of the mortgage amount.	+ Advantage: Low down payments; low interest rates, no pre-payment penalties; second mortgage permitted in some instances.
VA Loans: Again, The Veterans Administration does not actually loan money. Instead, it guarantees payments to loans made to qualifying military veterans. With VA loans, no down payment is required (if you choose to combine this type of loan with HomeSight's Purchase Assistance there is a down payment required. For more information, please call us at (206) 723-4355), lenders are not permitted to charge pre-payment penalties and borrowers are not permitted to pay points. There is a loan origination fee. Like FHA-insured loans, there are specific limits to the loan amounts allowed.	+ Advantage: No down payment; no points allowed; no pre-payment penalties.