Types of Mortgage Loan Products
- Adjustable Rate Mortgage (ARM)
- A mortgage loan or Deed of Trust which allows the lender to
periodically adjust the interest rate in accordance with a specified
- Balloon Mortgage
- A balloon payment is due on a mortgage that usually offers a low
monthly payment for an initial period of time. After that period of
time elapses, the balance must be paid by the borrower or the amount
must be refinanced. The large sum payable at the end of the loan
term is called the “balloon payment.”
- Construction Loan
- A short-term, interim loan for financing the cost of construction;
the lender advances funds to the builder at periodic interval as
- Conventional Loan
- A private sector loan which is not guaranteed or insured by the U.S.
- FHA Loan
- FHA loans have been helping people become homeowners since 1934.
The Federal Housing Administration (FHA) - which is part of HUD -
insures the loan, so your lender can offer you a better deal through
a low down payment, lower closings and easier credit qualifying.
In recent years, mortgage insurance fees on FHA loans are making
them less competitive.
- Fixed-Rate Mortgage
- A mortgage with an interest rate that does not change over the life
of the loan, and as a result, monthly payments for principal and
interest do not change.
- Hybrid ARMs
- These loans are a mix or a hybrid of a fixed-rate period and an
adjustable-rate period. For example, a 3/1 ARM will have a fixed
interest rate for the first three years and then will adjust annually
until the loan is paid off. The first number tells you how long the
fixed interest-rate period will be and the second number tells you
how often it will adjust after the initial period.
- Interest Only ARMs
- An interest-only (I-O) ARM payment plan allows you to pay only the
interest for a specific number of years, typically between 3 and 10
years. This allows you to have smaller payments for a period of time.
After that, your monthly payments will increase, even if the interest
rate stays the same, because you must start paying back the principal
as well as the interest each month.
- VA Loan
- A VA loan is a mortgage loan guaranteed by the U.S. Department of
Veterans Affairs. The VA loan was designed to offer long-term
financing with no down payment to eligible American veterans or their
surviving spouses (provided they do not remarry). The VA loan allows
veterans 103.3 percent financing without private mortgage insurance.
A VA funding fee of 0 to 3.3% of the loan amount is paid to the VA;
this fee may also be financed.