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Yvette M. Palmer, Associate Broker
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Types Of Mortgage Loans

When it comes to deciding how to finance your loan, it’s smart to consider all options and figure out which loan type is right for your situation. Learn the basic information of different loan products so you’re prepared to make an informed decision about your mortgage. In applying for a mortgage, many consumers assume that they will deal with the same lender until either selling the house or paying off the mortgage. However, loans and the rights to service them are commodities that can be bought and sold, so keep track of who's currently holding and servicing your mortgage.

TYPES OF MORTGAGE LOAN PROGRAMS

The United States Department of Agriculture (USDA) gives out a variety of loans to help low- or moderate-income people buy, repair or renovate a home in a rural area. Some of the popular types of loans are: The single family direct home ownership loan, the single family guaranteed home ownership loan, the rural repair and rehabilitation loan or grant and the mutual self-help loan.
 
FHA LOANS
An FHA loan is a loan in the United States that is insured by the Federal Housing Administration.
 
VA LOANS
A VA loan is a loan in the United States guaranteed by the Veterans Administration. The loan may be issued by qualified lenders. The VA was designed to offer long-term financing to American Veterans or to their surviving spouses.
 
CONVENTIONAL LOANS
A loan secured by investors, but neither insured by the FHA nor guaranteed by VA. Both fixed rate and adjustable rate loans are available with conventional financing.
 
FIXED-RATE MORTGAGE
With a fixed-rate home loan, your interest rate remains the same for the life of the loan and the payment is split into equal monthly payments for the duration. The loan payments are amortized over the life of the loan.The interest payments are front-loaded, so during the first few years of the loan term, only a small portion of the payment pays off the principal.
 
VARIABLE OR ADJUSTABLE RATE MORTGAGE
With an adjustable rate mortgage, the rate of the loan can change throughout the term of the loan. Many ARMs have a short fixed period and then become truly adjustable. The rate of the loan is based on adding points to a fixed base.

HYBRID LOANS
A hybrid loan combines a fixed period along with an adjustable component. Usually these loans are fixed for a period of time and then the loan becomes adjustable where it is dependant on current rates.

BALLOON LOANS
A balloon loan is a real estate loan where there is a lump sum due at the end of the loan. This normally encourages an individual to refinance prior to the end of the term of the loan or sell your home.

JUMBO LOANS
A jumbo loan is a nonconforming loan for a single family home or multi-family property that exceeds the loan limitation guidelines of Fannie Mae and Freddie Mac.
 
REVERSE MORTGAGE
A reverse mortgage is a special type of home loan that lets a homeowner over the age of 62 convert a portion of the equity in their primary residence into income. These mortgages have become increasingly popular as more baby boomers enter or near retirement and also because they offer seniors an option to pay for a variety of expenses. The reverse mortgages loans are secured by the home and the owner does not have to repay the loan until they die, sell or permanently move out of the home. More on Reverse Mortgage Loans. 
 
PURCHASE MONEY MORTGAGE
A home-financing technique in which buyer borrows from the seller instead of, or in addition to, a bank. Sometimes done when a buyer cannot qualify for a bank loan for the full amount. Also called seller financing or owner financing.
 
LOANS WITH PRE-PAYMENT PENALTIES
A pre-payment penalty can be part of any type of loan, so you should check with the lender to find out whether the loan you want carries this type of penalty. However, loans with these penalties may offer initially lower payments in exchange for a promise to pay a specified lump sum if the borrower refinances the date specified in the mortgage agreement.

DIFFERENCE BETWEEN A BROKER AND BANKER

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