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Mortgage and assistance options available
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Several types of mortgages and programs are available to people looking to buy a home.
When it comes to buying a home, there are many kinds of mortgage types to choose from. It is important to do your research to hopefully end up with the kind that best fits your situation and goals as well as knowing what programs are available to help you.

Let's explore the different types of morgages.

Fixed-rate mortgage

This is just like it sounds Ė the interest rate stays flat over the entire term of the mortgage, which is often 15, 20 or 30 years. This is good if you secure a loan when interest rates are particularly low, but on the other hand, it could also hurt because if interest rates fall, you are left stuck paying the higher rate. The interest rate is included in your monthly payments and is the only thing that has the potential to change over time because as you pay down your mortgage, you accumulate less interest.

Adjustable rate or variable-rate mortgage

Often this type of mortgage offers a lower initial rate of interest than fixed-rate loans, however, later on rates may fluctuate over the life of the loan. Therefore, when interest rates rise, usually your loan payments do too.

Federal Housing Administration loan

This type lets buyers who may not qualify for a home loan get one low down payment. It is operated by the U.S. Department of Housing and Urban Development. However, the size of your loan has a maximum amount under this type, which depends on the average cost of housing in a region.

VA loan

These are guaranteed loans for eligible veterans, active duty personnel and surviving spouses of those who served in the military. These offer competitive rates and low or no down payments. However, here, too, the size of your loan may be limited.

Balloon mortgage

This is usually a fixed rate loan that has relatively low payments for a fixed period. However, after this time, the entire balance of the loan is due immediately and therefore could be risky for some borrowers.

Interest-only

With these loans, the borrower only pays the interest on the loan in monthly payments for a fixed term. However, after an initial period of time, the entire balance of the loan is due, which could mean much higher payments, paying a lump sum or refinancing.

Reverse mortgage

These mortgages are to allow seniors to convert the equity in their homes to cash. They donít have to pay back the loan and interest for as long as they live in the house. On the other hand, people should be careful because these are subject to aggressive lending practices and false advertising promises, particularly by lenders that prey on seniors. It is crucial to check to ensure the loan is federally insured.

Are there programs to help me?

The Pinellas County Department of Community Development and the Housing Finance Authority can help with mortgage assistance programs. There are also low interest rates for first-time homebuyers. Participating lending institutions offer 30-year, fixed-rate mortgages for first-time homebuyers, and some of these low-interest packages also offer some down payment and closing cost assistance.

The Home Buyer Club also offers homebuyer training, which gives individual counseling and longer-term support for prospective buyers. This is particularly helpful for those who want to find out what they must correct with their credit or other issues before they will qualify to buy a home. For information on any of these programs, call 464-4851 or the Housing Finance Authority at 800-506-5154.

Additionally, there is the Purchase and Repair loan program that helps people buy a home that needs a little extra TLC as well as getting money for renovations at the same time. New homeowners can get help estimating costs, soliciting bids, and working with contractors. According to the Pinellas County website, people may borrow up to 25 percent of the total cost of purchase and rehab at 1- to 5-percent interest. For details, call 464-8210.

What else do I need to know?

Get your credit report Ė This will show you how you have handled past credit accounts and debt, and if possible, obtain a copy before you begin the mortgage process. Therefore, you will have time to correct any erroneous information before it causes problems in securing a good mortgage.

Also, these days, there are fewer mortgage types available than there were during the housing boom. The bad loans caused major problems, which of course led to foreclosures, bank failures, bailouts and the recession. Therefore, it can be harder to qualify for a loan today, especially if people have a lot of debt or a bad credit score. However, now people will be less confused by the options available, and it is more likely for them to get a good, solid loan and not one that will cause problems later on.

Information drawn from www.pinellascounty.org, www.usa.gov, and www.hombuyinginstitute.com.

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