Each individual may have certain specific financial requirements. Innovations in the home loan market have resulted into design, development and marketing of several special type of mortgages offered to the borrowers in response to the specific requirements of the target group. Here you can learn about some various options.
Reverse MortgageThe reverse mortgages are increasing in popularity because they help to take care of the financial needs of the aging population. It has created a whole set of new considerations for financial advisors while designing the personal financial plans for the individuals. In reverse mortgage, instead of you paying installments for your home, you receive payment from the lender. You can receive the cash from the lender in many forms such as a lump sum amount, monthly payment or as a credit line. It is a loan against your home and you are not required to repay this loan as long as you live in that home (until you sell your home or permanently move out of your home or die).
Reverse mortgage is available in both fixed rate and flexible rate forms, so you can choose the reverse mortgage according to your risk preferences. The eligibility condition for most reverse mortgages is that you should be 62 years or older and that the home should be in your name.
The major advantage of reverse mortgage is that you can receive the cash against the value of your home without actually selling it. You receive the payment from the lender while you still live in your home. Another advantage is that there is no tax liability on the cash receipts as the cash you are receiving is in the form of a loan.
Reverse mortgage is best suited for the seniors who want to supplement their income from the value of their home but do not want to sell it till they live or move out of that home. The disadvantage of reverse mortgage is that the interest rates on home mortgages are less as compared to other investment options. If the person sells the home and moves to a smaller home or to a rented home and invests the remaining cash in more high yielding investments, the income may actually be higher. However, the reverse mortgage offers the income supplement for seniors without much risk.
VA loanVeterans Administration loan or VA loan is available only to qualified veterans for buying home for their own personal occupancy and guaranteed by the U.S. Department of Veterans Affairs (VA). However, these mortgage loans are not offered by the VA but by the financial institutions and mortgage companies. The advantages of this mortgage are that VA Guarantee improves the financing terms of the mortgage such as better interest rates, no insurance premium requirement, no pre-payment penalty and no or minimal down payment for the veterans.
The VA loans have been offered at 15-year, 20-year and 30-year terms. Both fixed rate and adjustable rate options are available under VA loans. The limitation of VA loans is that it is available only to qualified veterans and only if they are themselves occupying the home.
FHA LoanNot all homebuyers are lucky that they can afford the conventional home loans or mortgages available in the market. As a result, there is a growing trend in the United States to help low- to moderate-income earners buy homes. FHA loans were established to help lower income families obtain loans insured by the Federal Housing Administration.
The advantage of such loans is that less cash is required upfront. Unlike conventional loans, FHA loans allow borrowers to make down payments of as little as 3%. The qualifying standards for FHA loans are not as strict and the terms of the loan are slightly better than those of conventional loans. Both fixed-rate and adjustable-rate terms are available on FHA loans. The disadvantages are that loan amounts are limited and monthly mortgage insurance premiums are required, as well as an up-front premium at closing.
RHCDS LoansIn order to provide decent, safe, sanitary, affordable housing and community facilities to vibrant rural communities, USDA's Rural Housing and Community Development Service (RHCDS) programs help finance new or improved housing for moderate-, low- or very-low-income families. These loans are especially designed for farmers or people living in rural areas and are available to qualified borrowers who are unable to obtain home loans elsewhere.
Homebuyers are offered 30- or 38-year loans at fixed interest rates as low as 1 percent, depending on the family's adjusted income. The RHCDS loan provides supervised credit to many homebuyers, enabling them to maintain stable payment schedules in times of financial crises through "workout" agreements. The qualifying standards for RHCDC loans are not as strict and the terms of the loan are slightly better than with conventional loans.