Types of Mortgages

CONVENTIONAL:
These types of mortgages are currently made through banks, savings and loans, and mortgage companies. They are typically made for 25 to 30 years and are called "fixed rate" mortgages. The amount of money on a conventional mortgage ranges from approximately 75% to 95% of the value of the property.

ADJUSTABLE RATE:
This type of mortgage is one which the interest rate fluctuates throughout the term of the loan.

FHA:
This loan is made through banks, savings and loans, and mortgage companies, but is backed by the Federal Housing Authority. There are different programs within the FHA such as FHA 203 loan and FHA 245 loan. Qualifications and interest rates may differ from a conventional loan.

VA:
These loans are made to qualified veterans. The maximum interest rate is set by the Federal Government and these loans may require no money down.

SHORT TERM BALLOON:
These loans are typically for a set period of time, 1, 3, or 5 years for example. Although based on a payment schedule of 30 years they must be paid off at the end of 1, 3, or 5 year period. The term balloon is used because the entire amount or "balloon" amount is paid off at the end of the loan period.

GRADUATED PAYMENT MORTGAGES:
This plan allows people to make less of a monthly payment in the early part of a mortgage and greater amount of payment in later years.

SHARED APPRECIATION MORTGAGES:
Under this program, the borrower obtained a lower interest rate in exchange for giving the lender or some other party a share in the increased value of the home, so that when the property is sold, the equity is shared.

ASSUMPTIONS:
This is a method of financing that allows the buyer to take over an existing loan with the permission of the lender. This type of loan is normally less than current interest rates. Typically, all VA and FHA loans can be assumed.

OWNER FINANCING:
In some cases the seller is in a position to take back or hold the first or second mortgage on the property. This provides a mortgage when none was available, or more importantly, at a lower interest than the current market.

FANNIE MAE:
Federal National Mortgage Association is a national organization which "buys" mortgages from local lenders to keep a constant flow of mortgages available to home buyers.