What Types of Mortgages can you get?

by Denise Mason 09/08/2019

Multiple options are available when it comes to real estate loans. Figuring out which one you need can be disconcerting, to say the least. So, if you’re new to the game, here’s a quick guide to help you along. 

Standard Mortgages:

  • Conventional – Loans that fall within the FNMA/FHLMC (Fannie Mae/Freddie Mac) guidelines where the Federal government is not insuring the payment through the VA or FHA loan process are known as conventional loans. A conventional loan has either a fixed or an adjustable interest rate, and typically requires ten to twenty percent downpayment.
  • Conforming – When a loan conforms to guidelines set by FNMA/FHLMC (Fannie Mae/Freddie Mac) where either Fannie Mae or Freddie Mac could later purchase the loan, it is said to be conforming. A non-conforming loan would be any loan that does not fit the guidelines, so a Jumbo Loan, for example, would be outside the scope of FNMA/FHLMC because of its size.
  • FHA Insured – Loans that are insured by the Federal Housing Administration (FHA) are made to borrowers meeting specific criteria and often require lower down payments.
  • VA – American military personnel and veterans may obtain a mortgage through the U.S. Department of Veteran Affairs (VA) as typically preferred interest rates and/or no or lower down payments.

Specialty Mortgages:

  • Reverse Annuity – This particular mortgage is for seniors on a fixed income and is used to generate monthly revenue from the equity in their home. They continue to live in the house as they like, but ownership reverts to their lender once they move from the home or pass away.
  • Wrap around – Sometimes, a homeowner needs to sell, but chooses to keep a preferential mortgage on the home, so the buyer pays a mortgage payment that covers both the original mortgage and the amortized difference between the existing mortgage and the selling price. The seller is considered to have loaned the “wrap around” amount to the buyer.
  • Balloon – A balloon mortgage is a loan with a short (three years, perhaps) term that has a fixed principal and interest monthly payment that typically is not fully amortized. At the end of the term, the rest of the mortgage is due in a single (balloon) payment at which time buyers typically refinance. These loans are useful for buyers that intend to sell within the balloon period at an appreciation value (such as for a longer fixer-upper), or who could not qualify for a conventional loan at the time but expect that situation to change during the length of the mortgage.
  • Graduated Payment – Sometimes a loan is structured so that earlier payments are lower than later payments and the payments increase on a scheduled basis.
  • Refinance – A refinance is a mortgage taken out to replace an existing mortgage. Homeowners sometimes add more money from the home's equity onto the loan to complete home improvements.

Short-Term Home Loans:

In addition to full mortgages, there are several short-term loans that homeowners may take in special situations. These include bridge loans (between buying and selling on contingency), construction loans, non-recourse loans (rare, and when the buyer has no responsibility for payment), and home equity loans or lines of credit based on the value difference between the amount owed on the home and its current fair market value.

If you’re wondering what type loan is right for you, speak to a mortgage professional about your situation and get pre-approved.

About the Author
Author

Denise Mason

Hi! I'm Denise Mason. WELCOME to my Website! Being a full-time REALTOR® gives me the opportunity to assist in achieving your wants, desires, needs, and priorities in selling or finding a home. My goal is to take care of my real estate clients by providing an exceptional, no drama experience that you not only deserve but should demand in the hectic and competitive marketplace of today. I work closely with you throughout your entire real estate transaction. I work to be your family REALTOR® for life. Success begins and ends with good communication. I love what I do and do what I love! I am positive, enthusiastic and truly enjoy people and the real estate business. My commitment to you, my client extends far beyond a single transaction. My goal is to communicate, educate and exceed expectations! As the daughter, wife, and mother of active duty and retired service members, I've had numerous relocation experiences; renting, buying and selling a home. I grew up in Arlington County, VA and lived there for more than 20 years. Upon my husband's retirement from the Army we could think of no better place to call home than Virginia, the place of our childhood. I have been a Prince William County resident since 1997. We have raised and educated three children in the Prince William County School system. My family is my pride and priority which makes me no different than you or any other individual who wants a safe and comfortable environment for yourself, family and friends. I look forward to helping you achieve your real estate goals. Call me at 703-283-0969 or email me so we can meet over tea or coffee & I can get to work for you!