Types of mortgage loan

Popular Types of Mortgage Loan Programs


Fixed-Rate Mortgage Types
This is the granddaddy of them all. Today you can choose from 5-year, 10-year, 15-year, 20-year-, 30-year, 40-year and even 50-year fixed-rate mortgages, all of which are completely amortized.

FHA Loans
FHA mortgage loan types are insured by the government through mortgage insurance that is funded into the loan. First-time home buyers are ideal candidates for an FHA loan because the down payment requirements are minimal and fico scores do not matter.

VA Loans
This type of government loan is available to veterans who have served in the U.S. Armed Services and, in certain cases, to spouses of deceased veterans. The requirements vary depending on the year of service and whether the discharge was honorable or dishonorable. The main benefit to a VA loan is the borrower does not need a down payment. The loan is guaranteed by the Department of Veteran Affairs, but funded by a conventional lender.


Interest-Only Mortgage Types
Calling a mortgage loan type an "interest-only mortgage" is a bit misleading because these loans are not really interest only, meaning the borrower pays only interest on the loan. Interest-only loans contain an option to make an interest-only payment. The option is available only for a certain period of time. However, some junior mortgages are indeed interest only and require a balloon payment, consisting of the original loan balance at maturity.


Hybrid Types of Mortgage Loans

Option ARM Mortgage Types
Option ARM loans are complicated. They are adjustable-rate mortgages, meaning the interest rate fluctuates periodically. Like the name implies, borrowers can choose from a variety of payment options and index rates. But beware of the minimum payment option, which can result in negative amortization.

Combo / Piggyback Mortgage Loan Types
This type of mortgage financing consists of two loans: a first mortgage and a second mortgage. The mortgages can be adjustable-rate mortgages or fixed-rate or a combination of the two. Borrowers take out two loans when the down payment is less than 20% to avoid paying private mortgage insurance.