Loan Types


Fixed-Rate Mortgage

Just as the name says, the interest rate on a fixed-rate mortgage stays the same throughout the life of the loan. The fixed rate mortgage provides the buyer with assurance that their interest rate will never change and monthly payments remain consistent.

Common variations of the fixed rate mortgage are the 30-year and the 15-year fixed. The 30-year is the most commonly quoted mortgage rate. The 15-year will offer a lower interest rate but results in a larger payment because of the shortened term.

Adjustable Rate Mortgage (ARM)

An adjustable rate mortgage is a loan in the interest rate adjusts at predetermined intervals. The interest rate adjustment is often tied to some index and often has a cap on the maximum amount the interest rate can change at each adjustment and through the life of the loan. Adjustable rate mortgages typically have a lower interest rate than conforming loans.

Examples:

5/1 ARM has a fixed interest rate for the first 5 years and can adjust once a year after.

5/5 ARM has a fixed interest rate for the first 5 years and can only adjust once every 5 years after.

FHA Loan

A FHA loan is a mortgage insured by the Federal Housing Administration, a government agency within the U.S. Department of Housing and Urban Development. Borrowers with FHA loans pay for mortgage insurance, which protects the lender from a loss if the borrower defaults on the loan. Because of the insurance that the borrow pays, lenders are able to offer more attractive interest rates with less stringent and flexible loan requirements including lower credit scores and higher debt-to-income ratios.
FHA loans only require 3.5% of the purchase price as a down payment.

VA Loan

A VA loan is a mortgage guaranteed by the Department of Veteran Affairs and can be issued by qualified lenders. The basic intention of the VA direct home loan program is to supply home financing to eligible veterans in areas where private financing is not generally available and to help veterans purchase properties with no down payment. A VA loan can finance up to 103.3% of a purchase without mortgage insurance.

Loan Limits


Conforming Loan

A conforming loan is a mortgage that meets Fannie Mae and Freddie Mac guidelines. Other guidelines include the borrower’s loan-to-value ratio, debt-to-income ratio, credit score and history, and documentation requirements. The loan amount is limited to $424,100. A borrower can qualify for a conforming loan with as little as 3% down, but the most common is 20%

High Balance Conforming Loan

A high balance conforming loan is a mortgage that meets Fannie Mae and Freddie Mac guidelines. Other guidelines include the borrower’s loan-to-value ratio, debt-to-income ratio, credit score and history, and documentation requirements. A high balance conforming has a loan amount from $424,100 to $635,150.

Jumbo Loan

A jumbo loan may be high in quality similar to the conforming and high balance conforming loans but exceed the conforming amount of $635,150. Jumbo loans typically carry a higher interest rate than conforming loans.

Jumbo Loans typically require at least 20% of the purchase price as a down payment.