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7 Most Common Types of Mortgages Explained

05/17/2010

When looking to purchase a home most individuals cannot pay for it outright in cash. The solution is to obtain a mortgage, or a secured home loan. There are two types of mortgages:

A) Conventional and Government Loans

B) Adjustable Rate Loans, Fixed Rate Loans, and the various combination loans.

Conventional and Government loans: Any loan that is not a VA, FHA or an RHS.

7. VA Loans: Veteran Affairs (VA) Loans are loans delegated U. S. Dept of Veterans Affairs. A VA Home Loan available to past and current military officers. It allows returning solders to find low rates.

6. FHA Loan: The Federal Housing Administration (FHA) is a part of the U.S. Department of Housing and Urban Development (HUD) .With an FHA home loan you can expect low rates and less restrictions in terms of minimum credit score to qualify.

5. RHS Loan Programs: A great option for those who wish to live in rural areas of the county. These loans have zero down payments and very low closing costs.

4. State and Local Housing Programs: Most states will have a housing initiative program. Usually these programs can offer the lowest mortgage rates.

3. Conforming Loans: Conventional loans may be conforming or
non-conforming loans. A conforming loan is one in which the terms follow those set forth by Fannie Mae and Freddie Mac.

Jumbo Loans: Most loan institutions have a maximum amount they are able to lend. If a loan is required above the minimum, then it will carry a higher rate of interest due to increased fisk. These loans are known as jumbo loans.

2. Fixed Rate Mortgages (FRM): Interest rates are fixed with these loans for the duration of the note. Payments can be amortized over 10, 15, 20, 25, 30, or 40 years. Most individuals opt for a 15 or 30 year fixed rate mortgage.

1. Adjustable Rate Mortgage (ARM): The interest rate and monthly installments will fluctuate with the market. Usually a ceiling is set that the interest rate cannot pass.

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