Conventional loans are the most common type of loans used for home financing. Fannie Mae and Freddie Mac are the two government sponsored entities who provide the banks with the guidelines and funds for issuing conventional loans.
FHA loans are government insured loans, that have slightly looser guidelines than conventional loans. This includes a down payment as low as 3.5% and lower income requirements. All FHA loans require mortgage insurance.
Jumbo loans have loan amounts that exceed the conforming loan limits set by Fannie Mae and Freddie Mac. Currently the maximum conforming loan amount is $625,500 but may be less depending on location of property. Jumbo loans typically have stricter qualification requirements.
Homeownership Affordable Refinance Program (HARP)
If your mortgage is currently held by Fannie Mae or Freddie Mac with a note date on or before May 31st, 2009, the HARP refinance option offers a streamlined process to lower your rate and/or term to save money and pay off your loan faster.
VA loans are available to U.S. Army vets and only for owner-occupied properties (not available on investment properties). This type of loan allows a buyer to put little or no money down when buying a home and does not require mortgage insurance. VA IRRL (Interest Rate Reduction Loans) are streamlined refinance loans that do not require income or value verification.
VA loans typically require a VA funding fee that ranges between two to three percent of the loan amount.
Reverse mortgages were created specifically for senior homeowners, 62 years and older, who want to convert part of their home’s equity into loan proceeds. Reverse mortgages do not require monthly principal and interest mortgage payments. They are only available on owner-occupied properties and have strict limitations on the amount of money that can be borrowed.
Fixed rate loans offer rates that do not change over the entire term of the loan. Fixed rate loans are available through the conventional, FHA, Jumbo, HARP, VA and Reverse options. The most common fixed rate terms are 30 years, 20 years and 15 years.
Adjustable Rate (ARM)
Adjustable rate mortgages are thirty year loans with an initial fixed period ranging from one to ten years. After the fixed period ends, the interest rate adjusts according to a pre-determined market index. ARM loans are desirable due to the fact that the interest rate during initial fixed period is typically lower than the rates offered of fixed rate loans.