A Conventional Mortgage
The most common of loan types, this would be a loan that is not insured or guaranteed by the federal government. A conventional, or conforming, mortgage must adhere to the guidelines set by Fannie Mae and Freddie Mac. It may have had either a fixed rate or an adjustable rate.
This is a mortgage loan program established by the United States Department of Veterans Affairs to help veterans and their families obtain home financing. The Department of Veterans Affairs does not directly originate VA loans; they establish the rules for those who may qualify and dictate the terms of the mortgages offered and insure VA loans against default.
VA loans offer up to 100% financing on the value of a home. To qualify for a VA loan, borrowers must present a Certificate of Eligibility with Full Entitlement. This establishes their record of military service to the lender. VA loans are insured by departments of the United States government.
This is a mortgage insured by the Federal Housing Administration (FHA). FHA loans are designed for low to moderate income borrowers who are unable to make a large down payment. FHA loans allow the borrower to borrow up to 96.50% of the value of the home. The 3.50% down payment requirement can come from a gift or a grant, which makes FHA loans popular with first-time buyers and helps borrowers with lower credit scores.
This is a type of mortgage if you’re a senior 62 or older can borrow money against the value of his or her home. No repayment of the mortgage (principal or interest) is required until the borrower dies or the home is sold. After accounting for the initial mortgage amount, the rate at which interest accrues, the length of the loan, and rate of home price appreciation, the transaction is structured so that the loan amount will not exceed the value of the home over the life of the loan. Any existing liens must be paid off with the proceeds of the reverse mortgage.
A reverse mortgage provides income that people can tap into for their retirement. The advantage of a reverse mortgage is that the borrower’s credit is not relevant; the borrower does not make any payments. Because the home serves as collateral, it must be sold in order to repay the mortgage when the borrower dies (in some cases, the heirs have the option of repaying the mortgage without selling the home).
Variable Rate or Adjustable Rate Mortgage (ARM)
This is a loan program with a variable interest rate that can change throughout the life of the loan. It differs from a fixed-rate mortgage, as the rate can move up or down depending on the direction of the index it is associated with.