Types of Mortgages

• Adjustable Rate Mortgage (ARM).

  An ARM (sometimes called a "variable rate" or "floating rate" mortgage) is a  type of mortgage rate loan whose interest rate changes periodically up or down, usually once or twice a year."

  See >> Consumer Handbook on Adjustable Rate Mortgages," Publications and Educational Resources, The Board of Governors, Federal Reserve System.

• Fixed-Rate Mortgage.

  With a fixed-rate mortgage, your interest rate stays the same for the term of the mortgage, which is usually 30 years. Your principal and interest payment remains stable, making it easier to plan a monthly budget. However, initial interest rates tend to be higher than with other types of loans.

• Conventional Mortgage.

  A conventional type of mortgage is not insured by either the Federal Housing Administration (FHA) or the Department of Veterans Affairs (VA), and thus usually requiring a 10 percent - 20 percent down payment.

• FHA-Insured Mortgage.

  In this type of loan, the Federal Government (Federal Housing Administration or HUD) insures the lender against loss in case the home buyer defaults on the loan. This program was set up so that Americans who can't afford the 10 to 20% down payment required by most lenders, can still buy a home. Many homes can be bought with FHA-insured mortgages, which allow you to purchase the home with a low down payment. You do not have to be a first-time buyer in order to qualify for an FHA loan

  See >>

  1. Real Estate Guide: Mortgage (FHA Financing) - FHA Mortgage Questions and Answers .

  2. FHA.com. An FHA refinance mortgage or FHA loan allows for the refinance or purchase of a home with a low down payment. These loans are great for the first-time homebuyer.

   

• VA Loan.

  The Veterans Administration Loan is guaranteed by the Department of Veterans Affairs against loss to the lender, and made through a private lender.

  See >> Real Estate Guide: Mortgage (VA Financing) - Veterans Administration Loans

• Jumbo Financing.

  Jumbo loans are non-conforming loans in that they are for more than Fannie Mae or Freddie will approve which is currently is anything over $730,000. Borrowers must usually make a 20-percent down payment, have good credit, provide proof of income, and hold six months' of principal, interest, property tax, and insurance payments in reserve.

• Interest Only Loan.

  In an Interest Only Loan, the  borrower pays only the interest that accrues on the loan balance each month.  Because each payment goes toward interest, the outstanding balance of the loan does not decline with each payment.

  See >> Real Estate Guide: Mortgage (Interest Only Loans) - What is a interest only loan?

• 100% Financing.

  This type of financing allows you to borrow 100% of the value of your purchase. Unbridled 100% financing during the real estate boom of the first half this decade is listed as one of the major causes of the 2007 - 08 mortgage melt-down. Most conventional lenders have eliminated 100% financing altogether. However, if your credit is good, it is still available through various agencies, especially: Nehemiah Community Development Corporation; Ameridream, Inc. - Down Payment Assistance Program, Association of Community Organizations for Reform Now (ACORN): and Neighborhood Assistance Corporation of America (NACA).
   

  Note: As of 10/1/08, DPA is no longer permitted from the sources cited here. There is, however, action currently being taken in congress that may restore DPA programs such as these.

• Reverse Mortgages.

  In 1987 the United States Department of Housing and Urban Development (HUD) created Reverse Mortgages as a "Safe and Highly-Regulated Plan" to give older American Homeowners (over 62) greater financial security.

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See Also: Mortgage Resources