| It is not advisable to make an application for a loan | | | | payments on these loans and they are very simple in |
| without knowing the correct jargon that is used in the | | | | procuring. These loans are overseen by the Federal |
| market. Due to your lack of fluency with loan parlance, | | | | Housing Administration. |
| you may miss out on some beneficial feature, or end | | | | All these loans have the common features of low |
| up paying more than you should. | | | | down payments, long loan terms, no prepayment |
| So let us check out some of the common | | | | penalties and low interest rates. However, one basic |
| terminologies associated with loans. | | | | limitation with these loans is that they are targeted to |
| (1) Government and Conventional Loans – In the US, | | | | specific kinds of people only. For that reason, there |
| a very high percentage of people has borrowed | | | | could be more verifications and longer time for |
| mortgage loans to purchase their residential homes. | | | | processing. |
| About 20% of these home loans are guaranteed or | | | | There are some more types of loans that you could |
| insured by some agency that acts in conjunction with | | | | consider. The following are some of them:- |
| the federal government. For this reason, these loans | | | | (1) Fixed rate loans – These are the loans where |
| are also called as government loans. The rest 80% of | | | | the rate of interest remains fixed for the entire tenure |
| the loan constitutes what are known as conventional | | | | of the loan. These loans are generally for long term, |
| loans. Lenders who are not sponsored by the | | | | such as 20 or 30 years. The advantage with these |
| government provide such loans. Examples are the | | | | loans is that you can keep up with the payments since |
| FHA, VA and the RHS. | | | | you know well in advance how many the outgoings will |
| (2) Federal Housing Administration – These are | | | | be for the life of the loan. |
| known as the FHA. Started in 1934 during the Great | | | | (2) Adjustable rate loans – Also known as the |
| Depression to provide an impetus to the US housing | | | | variable rate loans, these loans have rates of interest |
| industry, this is the facility that provides people from | | | | that may rise or fall as per market trends. Here the |
| low and moderate income groups to get their | | | | borrowers could get up to ten years to repay. If there |
| mortgages. Lenders giving these loans are provided | | | | is a low rate at the onset, then you would get lesser |
| federal insurance against the losses. However it must | | | | time to begin repaying. |
| be noted that the FHA itself is not a moneylender. | | | | (3) Combination or hybrid loans – These are a blend |
| Hence when the borrowers are looking out for an | | | | of fixed and adjustable rate loans. Here the initial period |
| FHA loan, they must approach FHA approved lenders. | | | | is fixed, which could be less than one year. Within this |
| These could be banks or similar financial institutions. | | | | period the interest could be lower than the fixed rate |
| (3) Department of Veteran Affairs – The Veteran | | | | loans. But after this initial period is over, the loan would |
| Affairs provision, commonly known as VA, provides | | | | switch over to an adjustable rate loan. |
| veterans and people on active duties to buy homes | | | | (3) Balloon mortgages and pledged asset loans – In |
| with mortgages. Again, VA is not a lender, but it | | | | these loans, the monthly mortgage installments are |
| guarantees the mortgages and loans that are provided | | | | based on a fixed term, which could be as much as |
| by lending institutions. The VA loans are sponsored by | | | | fifteen to thirty years. During the life of the loan, you |
| the US Department of Veteran Affairs. They are very | | | | would have to make a smaller payment, but when the |
| beneficial to the people eligible for it, as they offer very | | | | loan is about to close, the dues would have to be |
| low interest rates, little or no down payments and low | | | | completed. People who have sufficient incomes to |
| declaration of income. | | | | pledge as collaterals are eligible to get pledged asset |
| (3) Farmers’ Home Administration – These are | | | | loans. |
| also abbreviated as FHA. The name is actually a | | | | Adam Heist is the webmaster of Loans Company |
| misnomer, since one doesn’t have to be a farmer | | | | Many of his articles and essays can be found on the |
| to avail of this loan. The only qualification is to have a | | | | site. Take a moment to visit us today. |
| home in the countryside. There are small down | | | | |