Financing a home with a mortgage is a very important financial decision. Failing to select a mortgage that is adapted to your budget and needs could result in outstanding debt. Start by learning more in the different types of mortgages available to determine which one is best for you. Fixed-rate mortgages are a popular option because assessing their impact on your finances is fairly easy. The interest rate will remain the same over the duration of the mortgage. Depending on the cost of the home you wish to finance, you could make payments during 15, 20 or even 30 years. A fixed-rate mortgage is an excellent option if current rates are low. The downside to fixed-rate mortgages is that you could end up paying an interest rate well above the market if interest rates drop after you apply for your mortgage.
An adjustable-rate mortgage, also known as a variable-rate mortgage is a more interesting option if interest rates remain low throughout the duration of your mortgage. With this type of mortgage, interest rates are recalculated on a regular basis to match current rates on the market. This type of mortgage is interesting because the initial rate is usually lower than the market. However, rates will fluctuate over the years and can increase.
Balloon mortgages are a less popular option. Initial payments are fairly low but the entirety of the remaining balance is due immediately after a certain period. Balloon mortgages usually have a fixed rate and low payments. However, having to cover the entirety of the remaining balance can be difficult. Balloon mortgages are a good option if you have a steady income and can put enough money aside to finish paying off the loan. An interest only loan means that you will be paying off the interests of your mortgage for a fixed period of time. You will have to pay off the amount you borrowed after a certain period of time. You can refinance your home to cover the amount of the loan, pay it off in a lump sum if you were able to put enough money aside or pay off your loan in monthly installments.
VA loans are another option you should consider if you are a veteran, on active duty or a surviving spouse. These loans include low guaranteed interest rates. A VA loan allows you to purchase a home with a low down payment or even without a down payment in some cases. However, the size of VA loans is usually limited. These are the most common home mortgages types. You should learn more about the current interest rates for mortgages to determine which option is best. Regardless of the type of mortgage you are interested in, the amount you can borrow will vary in function of your credit score and the value of the home you are interested in. You will also have to meet a few income requirements to be considered for a mortgage. Make sure you meet all these requirements before you think about applying for a mortgage.
Some additional reading on mortgages and mortgage types: http://en.wikipedia.org/wiki/Mortgage_loan