Types of Loans

Adjustable Rate Mortgage vs Fixed Rate Mortgage

Adjustable Rate Mortgage (ARM) – A mortgage that has a fixed interest rate for a period of time such as 5 or 10 years.  After that time, the interest rate (and monthly payment) will adjust up or down, typically once a year based on market indexes.

Fixed Rate– A mortgage with a single fixed rate that does not changed over the life of the loan.  These loans typically are for 15 or 30 years.

Loans

Conventional Mortgage– Mortgages that are not insured by the government are conventional loans. Some examples include:

             Conforming loans– Loans that fall within the maximum limit as set by the government agencies Freddie Mac and Fannie Mae.

             Jumbo loans/ Non-conforming loans – Loans for homeowners that need a loan that is greater than the conforming loan limit for their area of the country.

FHA Loan- A FHA Loan is insured by the Federal Housing Administration and issued by a private mortgage lender. FHA loans are attractive to potential borrowers because they allow people to purchase a home with a small down payment and require an average credit score.

VA Home Loan- The United States Department of Veterans Affairs (VA) created a mortgage loan that provides financial assistance to veterans. This mortgage is guaranteed by the VA, which has helped over 25 million veterans and service personnel obtain a mortgage. 

 Non-Qualified Mortgage (Non- QM) Loan– Any home loan that doesn’t comply with the QM rules is called non-QM. A non-QM loan is not necessarily a high-risk loan; it’s merely a loan that doesn’t meet the QM standards.  Examples of a non-QM loan include interest-only or limited/alternative documentation loans.  Non-QM Loans are NOT subprime mortgages or “stated-income” loans.

Investment Property – Loans for 1-4 units used as investment income. In real estate investing, taking a conventional mortgage loan is the most common investment property financing option.