Types of Mortgages
Mortgage loans come in several varieties, each of which serve a specific need or desire the buyer may have; however, a good lender will do her due diligence in order to recommend the most appropriate loan for her clients.
Fixed Rate Mortgage
Fixed rate mortgages are the most common types of home loan in a calm economy, and most often have a 30 year or 15 year term--there are other loan terms such as 10, 20, 40, or even 50 year terms. A fixed rate mortgage is the most conservative way to go, but you do end up paying more in the early years, and if the property that is being purchased is not going to be held onto for more than a few years, then another loan option may be more suitable.
FHA stands for Federal Housing Administration, and an FHA loan is one that is subsidized by the government, and allows for as little as 3.5% down payment for a primary residence. This option is great for lower income buyers, or those who have less than great credit or a small down payment.
Adjustable Rate Mortgages (ARM)
Adjustable rate mortgages have their APR tied to the current interest rates. The rate can fluctuate based on predetermined intervals, and include maximum and minimum prevent wild swings. The benefit of an ARM loan is that the initial interest rate is lower than a fixed rate mortgage; however, it should always be assumed that the rates will go up after the initial period--this is important because you do not want to be caught off guard when this does happen.
There are a variety of adjustable rate mortgages including flexible payment option ARM, interest-only ARM, and convertible ARM.
Jumbo loans are ones which are above the Fannie Mae and Freddie Mac conforming guidelines. It can vary by market depending on the prices of the houses in a particular market.
These are the major types of home loans that are available; however, there are other specialty loans that your broker may recommend depending on your needs and qualifications.