The Conventional Loan

A conventional loan is a mortgage that government agencies do not insure or guarantee. Agencies like the Federal Housing Administration (FHA), the Farmers Home Administration (FmHA), and the Department of Veterans Affairs (VA). These loans are usually fixed in term (length of time) and interest rate.

The Jumbo Loan

A jumbo loan is a mortgage with a finance amount larger than the limits set by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation. The limit is $417,000 for most areas. Jumbo loans usually carry a higher interest rate because those agencies will not fund them. These rates are typically .25% to .50% higher than that of a conforming loan.

The FHA Government Loan

The Federal Housing Administration insures FHA loans. In other words, the FHA guarantees that a lender won’t have to write off a loan if the borrower defaults ’ the FHA will pay. Because of this guarantee, lenders are willing to make large mortgage loans.

The VA Government Loan

The VA Loan 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; instead, they establish the rules for those who may qualify, dictate the terms of the mortgages offered and insure VA loans against default.

The Rural Development Loan

The Rural Housing program works to the preserve rural communities. Rural Development, a division of the US Department of Agriculture, helps lenders work with low and moderate income families living in rural areas to make homeownership a reality. Providing affordable homeownership opportunities promotes prosperity, which in turn creates thriving communities and improves the quality of life in rural areas. This program features 102% financing for qualified moderate-income families looking to purchase single-family homes. For borrowers with little or no cash in qualifying areas, it is ideal. Subsequently, this loan type usually has no down payment or closing costs.

Rehabilitation & Repair FHA 203k

FHA’s 203(k) program permits homebuyers to finance up to an additional $35,000 into their mortgage to improve or upgrade their home before move-in. With this product, homebuyers can quickly and easily tap into cash to pay for property repairs or improvements, such as those identified by a home inspector or FHA appraiser.

Interest Rates

The Fixed Rate Mortgage

A fixed rate mortgage is one where your payments and interest do not change for the term of the loan. Fixed rate mortgages come in different term packages, the most common being 30 or 15 years. However, other terms are available.

The Adjustable Rate Mortgage (ARM)

Lastly an Adjustable Rate Mortgage, or ARM, is a mortgage where the rate is typically fixed, or stays the same, for the first few years of the loan term, and then begins to change. Once the rate begins adjusting, the market determines the interest rate, not your personal financial situation. An index, which is a benchmark interest rate that reflects general market conditions, is used to determine periodic adjustments to the interest rate. The ARM is also known as the renegotiable rate mortgage, the variable rate mortgage or the Canadian rollover mortgage.