Douglas DeGroot's Profile Picture
Providence Wealth Advisors, LLC
Douglas DeGroot
20220 S. LaGrange Road
Frankfort, IL 60423
815-306-2020
dougdegroot@providencewealth.com
 
 




Buying a Home

 

Popular Types of Mortgages

The type of mortgage that's right for you depends on many factors, such as your tolerance for risk and how long you expect to stay in your home. Here are some characteristics of various popular types of mortgages.

Conventional Fixed Rate MortgagesAdjustable Rate Mortgages (ARMs)
  • Low risk
  • 10- to 40-year terms
  • Interest rate doesn't change
  • Larger down payment (compared to government mortgages) may be required
  • Payment remains the same
  • Higher risk
  • Initial interest rate often lower than conventional fixed rate mortgage
  • Interest rate may go up or down
  • Interest rate usually adjusted annually
  • Rate adjustments may be limited by cap(s)
  • Payment caps can result in negative amortization in periods of rising interest rates
Government MortgagesHybrid Adjustable Rate Mortgages (ARMs)
  • FHA, VA, or bond-backed
  • Interest rate sometimes lower than conventional fixed rate mortgage
  • Variety of programs available
  • Low down payment requirements
  • Less stringent qualifying ratios
  • Attractive to first-time homebuyers
  • Higher insurance costs may apply for FHA loans
  • Payment remains the same
  • Higher risk
  • Initial interest rate often lower than conventional fixed rate mortgage
  • Fixed term for 1-10 years, then becomes a 1-year ARM
  • May have option to convert to a fixed rate mortgage before becoming a 1-year ARM
  • Interest rate may go up or down
  • Rate adjustments may be limited by cap(s)
  • Payment caps can result in negative amortization in periods of rising interest rates
Jumbo Loans
  • FHA loan limits for 2022 range from $420,680 in low cost areas to $970,800 in high cost areas.
  • Size of loan increases lender's risk, so interest rates are generally higher than for conventional fixed rate mortgages

Caution:  A negative amortization loan can be risky because you can end up owing more on your mortgage than your home is worth.



IMPORTANT DISCLOSURES Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, legal, or retirement advice or recommendations. The information presented here is not specific to any individual's personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

This communication is strictly intended for individuals residing in the state(s) of IL and IN. No offers may be made or accepted from any resident outside the specific states referenced.
Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2022.