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What are some different types of home loans?

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Quick Answer

Types of home loans include fixed-rate mortgages, adjustable-rate mortgages and interest-only jumbo loans, according to Bankrate. A few other types are Federal Housing Administration loans, Veterans Affairs loans, balloon mortgages and reverse mortgages, says USA.gov.

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Full Answer

With a fixed-rate mortgage, the interest rate stays the same for the life of the loan, whether it is 15, 20 or 30 years or another period, explains USA.gov. However, if interest rates fall, a homeowner could be paying unusually high rates. Adjustable-rate mortgages are also called variable-rate mortgages, and they tend to start with lower interest rates than fixed-rate mortgages. Downsides include the unpredictability of interest rates and the possibility they rise significantly, also increasing loan payment amounts.

An interest-only jumbo loan helps wealthy homeowners who have irregular incomes, states Bankrate. The homeowners pay only interest for the first five, seven or 10 years, although they can also make payments on the principal. After the interest-only period passes, payments go up. Homeowners tend to pay different interest rates each year afterward and must pay on the principal as well.

A VA loan is for veterans, active-duty service members and surviving spouses, notes USA.gov. Rates are competitive, and the loans require little or no down payment. A reverse mortgage lets senior citizens convert the equity in their homes, and they pay nothing on the loan and interest while they stay in the house.

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