L O A N   T Y P E S

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Some of these loan types and characteristics may be shared.  For example, you can have either fixed or adjustable conventional loans.

 

CONVENTIONAL LOANS:  These are the most common types of first mortgages for consumers with a 5%-20% down payment and good credit.  These loans are underwritten through common guidelines set forth by Fannie Mae (or the Federal National Mortgage Association) and Freddie Mac (the Federal Home Loan Mortgage Corporation.)

FHA [FEDERAL HOUSING ADMINISTRATION]:  Started in 1934, these are loans insured by the FHA.  They help low to moderate income families get mortgages.  They are generally a little easier to qualify for than conventional loans and may require less of a down payment. Used often by first time home buyers. 

VA (DEPARTMENT OF VETERANS AFFAIRS) LOANS:  Established in 1944, these loans are to assist eligible people on active military duty or retired status to buy primary residences.   

JUMBO LOANS:  Any loans over $252,700 are considered Jumbo Loans.  They usually carry a higher interest rate and more money down than a conventional loan, at least 20%. 

FIXED RATE MORTGAGES:  The interest rates on these mortgage are fixed for the life of the loan.  The 30 year fixed is most common with the 15 year fixed popular with  refinances. 

ADJUSTABLE RATE MORTGAGES (ARMs):  The interest rate on these mortgages adjusts every so often, using a common benchmark rate as means of calculating the change.  They usually carry yearly and lifetime caps for rate increases and decreases.  

HYBRID LOANS:  These loans carry a fixed rate for a period of time, then adjust.  Some common types are the 7/23, which gives you a fixed rate for 7 years and then adjusts according to market changes, and the 10/1 which is fixed for 10 years than changes to a one year adjustable.

CONSTRUCTION LOANS:  These loans are meant to finance the actual construction of a home. Many of these are then paid off or converted into permanent financing.  They have higher rates than permanent financing. 

80-10-10 LOANS:  These loans are used to avoid Private Mortgage Insurance (PMI). You carry an 80% first mortgage and a 10% second mortgage with 10% equity.  There is also an 80/15/5 with the same structure.

HOME EQUITY LOANS:  These are used to take out a relatively small amount of money ($10,000-$30,000) for almost any purpose imaginable, from fixing up your house,  funding an education, to buying a new car.  The interest rate on these is usually competitive, there are few fees, and because of the equity position these loans are usually tax deductible. 

NO FEE LOANS:  A relatively new type of mortgage, these loans reduce your closing costs to little or nothing, but they will carry a higher interest rate.  You either pay closing costs and receive the absolute lowest rate or you reduce your closing costs at the expense of a higher monthly payment.  

"B" CREDIT LOANS:  A very broad term to describe anyone who has anything less than perfect credit, from a few late payments to bankruptcies and foreclosures.