There was a time when only three types of real estate loans were available to home buyers. Back then, it was only possible to acquire either conventional fixed-rate loans, FHA loans or VA loans. However, times are different now. Today, a myriad of real estate loan types are available, making it more convenient for home buyers to finance their real estate investments.
Popular Types of Real Estate Loans
Fixed-Rate Loans: Today, anywhere between 5-year and 50-year, authorized fixed-rate real estate loans are available, which as the name suggests, come with a fixed interest rate.
FHA Loans: The government insures FHA real estate loan types through mortgage insurance. FHA loans are ideal for first-time home buyers since there tend to be minimal down payment requirements and FICO scores are not important.
VA Loans: U.S. Army Veterans can avail VA loans from the government, depending on how long they served in the army and whether or not they had been honorably discharged. Considering the fact that no down payment has to be paid is the biggest benefit of VA loans. The Department of Veteran Affairs guarantees these loans, although a conventional lender funds them.
Hybrid Real Estate Loans
Option ARM Loans: These happen to be quite complicated, since they are adjustable-rate loans, so the interest rate periodically changes. As the name suggests, a choice between various index rates and payment options is available to borrowers. However, the minimum payment option must be kept in mind.
Piggyback Mortgage Loans: Two loans are included in this type of real estate financing, namely a first and second loan. The loans can be a combination of adjustable-rate and fixed-rate loans or either of them. Two loans are taken out by borrowers, as long as the down payment is below 20%, so paying private insurance is avoided.
Thus, the real estate investors of today can to use a variety of the many financing tools that are available to them, such as the many types of real estate loans mentioned above, to finance their real estate investment.