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Mortgage Loan Options - Types of Loans Available
Adjustable Rate Mortgage (ARM)
A mortgage in which the interest rate is not fixed but is tied
to an index and is periodically adjusted as the rate index moves
up and down. The initial rate is lower than the fixed rate mortgage.
Such ARMs commonly provide for an option to convert to a fixed
rate mortgage.
Balloon Payment Mortgage
A mortgage providing for specific payments at stated regular intervals,
with the final payment considerably more than any periodic payments.
Usually paid over a short term, such as five to seven years. This
type of mortgage may be beneficial if you move before the final
payment, as you can benefit from a slightly lower rate.
B or C Loans
Loans that do not meet the borrower credit requirements of Fannie
Mae and Freddie Mac are called 'B','C' and 'D' paper loans vs.
'A' paper conforming loans. B/C loans are offered to borrowers
that may have recently filed for bankruptcy, foreclosure, or have
had late payments on their credit reports. Their purpose is to
offer temporary financing to these applicants until they can qualify
for conforming "A" financing. The interest rates and
programs vary, based upon many factors of the borrower's financial
situation and credit history.
Biweekly Mortgage
A loan requiring payments of principal and interest at two-week
intervals. This type of loan amortizes much faster than monthly
payment loans. The payment for a biweekly mortgage is half what
a monthly payment would be. These are proving to be very popular
and wise choices for some consumers.
Bridge Loan
A loan to "bridge" the gap between the termination of
one mortgage and the beginning of another, such as when a borrower
purchases a new home before receiving cash proceeds from the sale
of a prior home. Also known as a swing loan.
Conforming Loan
A loan that conforms to Federal National Mortgage Association
(FNMA) or Federal Home Loan Mortgage Corporation (FHLMC) guidelines.
Conventional Loan
A mortgage loan that is not insured, guaranteed or funded by the
Veterans Administration (VA), the Federal Housing Administration
(FHA) or Rural Economic Community Development (RECD) (formerly
Farmers Home Administration).
FHA (Federal Housing Administration) Mortgage
The Federal Housing Administration is a federal agency established
by Congress in 1934. The FHA insures mortgage loans made by FHA
approved lenders on homes that meet FHA standards. Generally FHA
loans require lower down payments than conventional mortgages
and have less stringent income requirements.
Fifteen and Thirty Year Mortgages
A loan with a term of 15 or 30 years. Although the monthly payment
on a 15-year mortgage is higher than that of a 30-year mortgage,
the amount of interest paid over the life of the loan is substantially
less.
Fixed Rate Mortgage
A mortgage with an interest rate that remains constant for the
life of the loan, generally repaid over 15 or 30 years.
Graduated Payment Mortgage (GPM)
A fixed-interest loan with lower payments in the early years than
the later years. The amount of the payment gradually increases
over a period of time and then levels off at a payment sufficient
to pay off the loan over the remaining amortization period.
Jumbo Loan
A nonconforming loan that is larger than the limits set by the
Federal National Mortgage Association (FNMA) or Federal Home Loan
Mortgage Corporation (FHLMC) guidelines.
Non-Conforming Loan
A loan that does not conform to Federal National Mortgage Association
(FNMA) or Federal Home Loan Mortgage Corporation (FHLMC) guidelines.
Jumbo loans are nonconforming.
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