Mortgage Types

MORTGAGE-TYPES

Mortgage Types

 

Adjustable rate mortgage, ARM

Is a mortgage loan that is characterized by an interest rate which automatically adjusts or fluctuates with certain market indexes.  An Adjustable Rate Mortgage generally begins with an introductory or initial interest rate which then can rise or fall, but monthly payments may not exceed the ARM loan cap.

Assumable mortgage

Is a mortgage that can be transferred, this includes the interest and all, from the seller to the buyer.

 

Balloon mortgage

It is a loan that is short term.  This high risk loan leaves the borrower with a potentially very high balance at the end of the term of the loan.

 

Bridge loan

Is a short term loan that is used to quickly effect the sale while pending for more conventional real estate financing. This is not a popular loan but, it can be very useful in certain commercial real estate deals.

 

Buy down

This is where the seller or the lender puts in a sum of money in order to lower the initial interest rate on a home loan this makes the sale more appealing for the buyer.

 

Combination loan

This loan combines an initial loan which is normally a new home construction, with a second conventional home loan that supplants the first.

 

Conforming loan

Is a conventional loan that is characterized by loan limits that fall within those guidelines laid out by Government Sponsored Enterprises (GSEs) like Freddie Mac and Fannie Mae?

 

Construction loan

This is a short term loan for new home construction it is supplanted with a conventional long term home loan.

 

Conventional mortgage

This mortgage is offered by any one of the Government sponsored entities, it is different from a FHA loan.

 

Equity

It is the measurable value of a home or property above and beyond that owned on a loan.  This is a value many homeowners often borrow.

 

Fannie Mae

This is a private mortgage corporation that began as a government subsidized entity in the late 30s. Today Fannie Mae, along with Freddie Mac, is a government sponsored enterprise (GSE) and together they are responsible for setting annual conforming loan limits and assuring that most Americans are able to finance a home. Fannie Mae is commonly known as a secondary mortgage market and lends to mortgage lenders which in turn extend mortgages to borrowers.

 

FHA

Federal Housing Administration

 

FHA loan

This loan is extended by FHA-approved lenders and it is designed to assist borrowers that are unable to obtain approval for conventional home loans.

 

Fixed rate mortgage

Is a conventional mortgage with a fixed interest rate over the life of the loan? Monthly payments are the same from month to month.

 

Freddie Mac

Works in concert with Fannie Mae, Freddie Mac is a leading government sponsored enterprise (GSE) and is responsible for maintaining reasonable mortgage market stability, this assuring that Americans are able to purchase homes. Freddie Mac is a secondary mortgage market, meaning the corporation lends to lenders, which in turn extend mortgage products directly to borrowers.

High-risk loan

This home loan is extended to borrowers that have poor credit history or that fall outside the conventional or conforming loan limits set by Fannie Mae and Freddie Mac. Sub-prime loan is an example of a high-risk loan.

 

Home loan

This is not a mortgage it is the actual amount of money a buyer owes the lender in the purchase of a home.

 

HUD loan

This type of loan is available to HUD homebuyers that want t purchase and fix up a home. The loan is subsequently absorbed into the mortgage. The term “HUD loan” is often confused with “FHA loan.”

 

Jumbo mortgage

It is a high-risk loan, or non-conforming loan, in which the loan limit is higher than a conventional loan.

 

No-fee mortgage

This is a sales tactic to attract buyers who may not be able to pay out of pocket closing fees. Normally a no fee cost mortgage is bundled with a slightly higher interest rate that makes up the difference in the no fees over the life of the loan.

 

Piggyback loan

It is a second mortgage piggy backed onto a first mortgage and used in lieu of mortgage insurance. It is cost effective loan depending on the current market factors.

 

Portable mortgage

This mortgage can be carried by the borrower from one home purchase to the next.

 

Primary mortgage market

Simple…. direct lenders

 

Prime loan

Is a conforming loan, this loan is for those who fall within the limits set by Fannie Mae or Freddie Mac. It is often given to borrowers who have good credit.

 

Private label mortgage outsourcing

This is when a private bank or financial lender outsources mortgage products to another lender.

 

 

Quit claim deed

Is a document that releases one party in a home title from any responsibility and grants all responsibility to the.  This is normally used for spouses or in family situations in which more than one individual has an interest in a mortgage or property title.

 

Reverse mortgage

This type of mortgage designed for homeowners over 62 years of age it gives them access to home’s equity in cash payments it frees up money for them to use for other important finances or to make home repairs.

 

 

Second mortgage

This is also known as a home equity loan, a second mortgage gives the borrower’s flexibility to access the cash equity in their home.  It is normally useful for high-dollar expenses like college loans.

 

Secondary mortgage market

This is the segment of the mortgage and real estate securities market deal with the investment of mortgages but not direct mortgage lenders.

 

Short sale

This is a great tool for lenders and homeowners when foreclosure could be on the horizon. In a real estate short-sale lenders give homeowners permission to discount the home value (the outstanding loan balance) to effect a quick sale, thereby averting foreclosure.

 

Sub-prime loan

This is a high-risk loan that is packaged with non-conforming loan limits and interest rates which make it possible for homebuyers with poor credit to qualify for a mortgage.

 

Swing loan (Look at Bridge loan)

Turnaround loan (Look at Bridge loan)

 

VA loans

These are special often discounted home loans that are designed exclusively for military veterans.