There was a time when there were three mortgage loan types available to home buyers. You could get a <\/span>Fixed-Rate Conventional Mortgage<\/strong>, an <\/span>FHA Loan <\/strong>or a <\/span>VA Loan<\/strong>. But times, they are a changin\u2019.\u00a0 Now there is a vast array of mortgage loan types to be had!\u00a0 Let\u2019s learn about some of them, and the differences between them.<\/span><\/p>\n We will start with the most popular:<\/i><\/span><\/span><\/span><\/p>\n FIXED-RATE MORTGAGES\u200b<\/strong><\/strong><\/span><\/span><\/p>\n These loans come in 5-year, 10-year, 15-year, 20-year, 30-year, 40-year, and even 50-year timeframes. The interest rate remains the same for the duration of the loan, meaning monthly payments are predictable.<\/span><\/span><\/span><\/span><\/strong><\/strong><\/span><\/span><\/p>\n
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<\/p>\n FHA LOANS\u200b<\/strong><\/strong><\/span><\/span><\/p>\n
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\n<\/ul>\n FHA Mortgage Loan types are insured by the government through mortgage insurance that is funded into the loan. This is an <\/span><\/span>ideal loan type for first-time buyers<\/span><\/span><\/strong> because it has <\/span><\/span>minimal down payment<\/span><\/span><\/strong> requirements and does not rely on credit scores for approval.<\/span><\/span><\/span><\/span><\/span><\/p>\n VA loans are <\/span><\/span>government loans<\/span><\/span><\/strong> available to <\/strong><\/span><\/span>veterans <\/span><\/span><\/strong>who have served in the Armed Forces for the United States. They are also available to spouses of deceased veterans in some cases. The requirements depend upon the years of service and whether or not the veteran was honorably discharged or not. <\/span><\/span>The primary benefit of a VA Loan is that the borrower does not have to come up with a down payment. <\/span><\/span><\/strong>The loan is guaranteed by the Department of Veterans Affairs but funded by a conventional lender.<\/span><\/span><\/span><\/p>\n USDA Loans are offered through the U.S. Department of Agriculture for eligible home buyers who want to buy a <\/strong><\/span><\/span>rural property<\/span><\/span><\/strong>.<\/strong> They often come with <\/span><\/span>no down payment<\/span><\/span><\/strong> required<\/strong> and can sometimes be more affordable than an FHA loan.<\/span><\/span><\/span><\/p>\n This name is a bit misleading, as these loans are not truly interest-only in terms of the borrower only paying interest on the loan. The reality of the interest-only mortgage is that it offers an <\/span><\/span>option to make an interest-only payment<\/span><\/span><\/strong>.<\/strong> This option is only available for a set period of time. However, there are some <\/span><\/span>junior mortgages<\/span><\/a> that are interest-only and necessitate a balloon payment in the amount of the original loan balance at maturity.<\/span><\/span><\/span><\/p>\n ADJUSTABLE-RATE MORTGAGE TYPES<\/span><\/span><\/span><\/strong><\/p>\n There are various types of adjustable-rate mortgages <\/span><\/span>(ARMS)<\/span><\/span><\/strong>. They can fluctuate monthly, semi-annually, annually, or remain fixed for a set amount of time before they adjust.<\/span><\/span><\/span><\/span><\/span><\/p>\n
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<\/p>\n OPTION ARM MORTGAGE TYPES<\/span><\/span><\/span><\/strong><\/p>\n These types of loans are complicated. Like your standard ARM, the interest rate on them will fluctuate periodically, but in these loans, the borrowers can choose from various payment options and index rates.\u00a0 WARNING: The minimum payment option can be dangerous as it can result in negative amortization.<\/strong><\/span><\/span><\/p>\n
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<\/p>\n COMBO\/PIGGYBACK MORTGAGE LOAN TYPES<\/span><\/span><\/span><\/strong><\/p>\n This is a type of financing that consists of TWO loans<\/strong>: a first mortgage<\/em> and a second mortgage<\/em>. They can be adjustable-rate, fixed-rate or a combination of both.\u00a0 This option is used by borrowers when the down payment is less than 20% to avoid paying private mortgage insurance.<\/strong><\/span><\/span><\/p>\n
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<\/p>\n MORTGAGE BUYDOWNS<\/span><\/span><\/span><\/strong><\/p>\n A mortgage buy down is a choice for borrowers who want to pay a lower interest rate<\/strong> in the beginning of their loan.\u00a0 Basically, fees are paid to lower the rate, thus the name buydown<\/em>. Buyers, sellers, or lenders can buy down the interest rate for the borrower.<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n
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\n<\/ul>\n <\/p>\n BRIDGE LOANS<\/strong><\/p>\n <\/span><\/span><\/span><\/strong><\/p>\n Bridge loans are used when a seller\u2019s home has not yet sold and the seller wants to <\/span><\/span><\/span>borrow equity to buy another home<\/span><\/span><\/span><\/strong>.<\/strong>\u00a0 The seller\u2019s existing home is used as collateral for the bridge loan.<\/span><\/span><\/span><\/p>\n
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<\/p>\n <\/p>\n STREAMLINED-K MORTGAGE LOANS<\/strong><\/p>\n <\/span><\/span><\/span><\/strong><\/p>\n FHA has a program that provides money to a borrower to make <\/span><\/span>home Improvements<\/span><\/span> by rolling the funds into one loan. This is similar to the <\/span><\/span>203(K) Loan Program<\/span><\/a>, but involves less paper work and is easier to get than a 203(K).<\/span><\/span><\/p>\n
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<\/p>\n <\/p>\n EQUITY MORTGAGE LOAN TYPES<\/strong><\/p>\n <\/span><\/span><\/span><\/strong><\/p>\n <\/p>\n Equity loans are second, or junior<\/i> to the existing first mortgage. Borrowers take out equity loans to get <\/span><\/span>access to cash<\/span>. The loans can be adjustable, fixed, or a line of credit that allows the borrower to obtain funds on an as needed basis.<\/span><\/span><\/strong><\/p>\n <\/span><\/span><\/span><\/strong><\/p>\n
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<\/p>\n SHARED APPRECIATION MORTGAGES<\/b><\/span><\/span><\/span><\/p>\n![\"\"](\"https:\/\/www.homesforsaleinmontgomeryalabama.com\/agent_files\/sandra%20blog%206_11%203.jpg\")
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<\/span><\/i><\/span><\/span><\/span><\/p>\nNow, let\u2019s take a look at <\/i><\/span>HYBRID LOANS<\/i><\/span>:<\/i><\/span><\/span><\/span><\/span><\/i><\/span><\/h2>\n
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Finally, Specialty Mortgage Loan Types:<\/i><\/span><\/span><\/h2>\n
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