Mortgage Types
There are more mortgage loan products than you can imagine, literally hundreds of them. Most come with numerous variants within each product type. Each section will provide you a simple explanation and general guidelines for the major, but definitely not all, loan products. First, let us look at a few of basic try and discuss the variants of each. Click on a loan type to open its section:
FHA Loans: FHA, the “new sub-prime”, does not have many of the issues sub-prime has. It has been around since the Housing Act of 1934 created FHA to insure these loans. FHA is a department of the US Department of Housing and Urban Development.
Conventional Conforming (Fannie Mae and Freddie Mac loans) Conventional conforming loans are mortgage loans that meet the guidelines of the Fannie Mae or Freddie Mac. If you qualify for a conforming loan, you will receive the best interest rate available for the loan product being offered in the market. FHA and VA loans also offer this rate advantage to you for government loans.
Jumbo Loans These are loans that are over the Fannie Mae and Freddie Mac limits of $417,000. They come in both fixed rates and adjustable rates. There rates are higher than conforming loans, since these loans are not guaranteed by Fannie Mae or Freddie Mac.
Veteran’s Affair (VA) VA loans are loans guaranteed by the US Department of Veterans Affairs (The VA). These loans are for veterans of the United States Armed forces, the Coast Guard and National Guard who have not been dishonorable discharged and if you served during wartime been on 90 or more days of active duty and if you served during peace time have served at least 181 days of active service.
Rural Development (RD loans) These loans are made in rural areas and towns with a population of less than 10,000. There are two loan programs available.
ARM Loans Adjustable Rate Mortgages are called ARM loans. The have many different features and terms, but all of them adjust at some period of time during the mortgage term. FHA, VA, Fannie Mae, Freddie Mac, Niche Products, Sub-Prime, Alt-A, and Jumbo loans all have ARM loans that can be obtained with their product.
Niche Loan Products Niche loans and other loan product options have a plethora of options. This can make you dizzy with options. The products that will be covered in this section are Alt-A loans, Pay Option Arm loans.
Sub-Prime Loans A sub-prime loan is for borrowers who have bad credit. In theory it is not a bad idea, but because of competitive forces, the program went awry. Here is what a sub-prime was for.
Home Equity loans These are home loans primarily used for two purposes: home improvements and to cash out some of your equity. These loans are 2nd lien loans with a higher rate than first liens. The maximum term is 15 years and can be amortized as a 15 year loan or as a thirty year amortization payable in 15 years.
Reverse Mortgage Loans This is a relatively new product that will assist elderly borrowers who are asset rich and cash poor. To qualify you must be 62 years or older, and you must go through a mandatory education acceptable and/or sponsored by HUD.
