Residential property lending is a type of mortgage that allows homeowners to borrow against the value of their home. The loan is secured by the property, which means that if the borrower defaults on the loan, the lender can foreclose on the property and recoup its losses.
You’ve decided you want to buy a home, and now you need to figure out how to do it. Whether you’re looking for your first or your fifteenth, there are plenty of options available to you. But before you can do anything, you need to find a good place to put down some roots – in other words, get a residential estate loan.
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Here are some of the most common types of residential property lending:
1. Fixed-rate mortgages: As the name suggests, a fixed-rate mortgage has an interest rate that remains the same for the life of the loan. This makes budgeting for your monthly mortgage payments much easier, as you'll always know exactly how much you'll need to pay.
2. Adjustable-rate mortgages: An adjustable-rate mortgage (ARM) has an interest rate that can change over time. The initial interest rate is usually lower than that of a fixed-rate mortgage, which can make your monthly payments more affordable at first.
3. Balloon mortgages: A balloon mortgage has a fixed interest rate and monthly payment for a certain period of time, after which the entire remaining balance is due in one lump sum. This type of loan can be attractive because it offers low monthly payments at first.
4. Government-backed loans: There are several government-backed loan programs available for people who want to buy a home. These programs, such as FHA loans and VA loans, often have more lenient requirements than conventional mortgages, making them easier for people with limited financial resources to qualify for.