Are you looking for a home loan, but you are not sure which one is right for you? There are many different types of home loans and it can be very
confusing to try to pick the best option for yourself. Here are 7 different types of home loans and what they should be used for.
The first one is the traditional
purchase mortgage. This is a home loan you get to buy an existing home. Be careful not to do the 100% financing option because you will start with no equity and it
will take you 10 years or so to build any real equity. You should always put at least 10% down.
The second type of home loan is a refinance loan. This is a
loan that is used to get a lower rate, pay off debt against your home, or to add on to your home. This is a first mortgage that is usually between 80% and 90% of the
value of your home. Make sure the benefits of your refinance out weighs the loan itself.
The third loan is the second mortgage. This is similar to a refinance,
but can go up to 100% and sometime 125% of your home value. These are used in emergency situations, especially the 125% loan because the rate is much higher
and you will be tying up all your equity.
The fourth different type of home loan is the construction loan. This is a loan that is used to start building a home. It
has 4 stages of funding as the home is build and if you are not quite wealthy, then you are wasting your time building. It usually takes a new home around 10 years to
appreciate to the value of the original construction loan.
The fifth type of loan is the first time home buyers loan. This is a purchase mortgage that is designed
for anybody that is purchasing their first home.
The sixth type of loan is the home equity loan. This is similar to a second mortgage, but many times the rate is
prime plus a percentage. These are good for people that just need a little bit of money.
The seventh different type of home loan is a line of credit. This is a
revolving account that works much like a credit card only your home is the collateral. These are good for people with a business or with an addition to their home
because if either one gets more expensive than planned for you can take out more money on your line of credit.
There you have it, seven different types of
home loans. Now you just need to pick the right one for you and start applying.
