Conforming Loans
Conventional loans that follow the terms and conditions established by the guidelines of
Fannie Mae and Freddie Mac.
- Fixed-Rate Mortgage
The interest rate and the principal payments remain fixed throughout the loan. Keep in
mind your monthly escrow account payment could vary from year-to-year as taxes and
insurance rates change.
- Variable or Adjustable-Rate Mortgage
The interest rate on the loan fluctuates over the period of the loan. Periodic adjustments
to the interest rate are made based on changes to a defined index. The loan's interest
rate is determined by adding a fixed number of points to the defined index.
- Balloon Loan
Short term, fixed-rate mortgage that has monthly payments usually based on a 30-year
amortization schedule and a lump sum payment due at the end of term, usually 3, 5 or 7
years. The interest rate on balloon loans is usually less than a 15- or 30-year fixed-rate
mortgage.
- Piggyback Loan
A second mortgage that closes with the first. Often the first mortgage is for 80% of the
purchase price and the "piggyback" is for 10%. The home buyer covers the
remaining 10% with their down payment. (Some lenders will write a second mortgage of 15%
or even 20% of the purchase price.)
- Housing Finance Agencies
These agencies offer special loan programs to low- and moderate-income buyers, buyers
interested in rehabilitating a home in a targeted area, and other groups as defined by the
agency. Working through a housing finance agency, you can receive a below market interest
rate, down payment assistance and other incentives.
Jumbo and Non-Conforming Loans
Loans above the maximum amount established by the guidelines of Fannie Mae and Freddie
Mac. Often the interest rate charged for a jumbo or non-conforming loan is higher than
that of a conforming loan.
- B/C Loans
Loans for borrowers who cannot meet the credit guidelines established by Fannie Mae and
Freddie Mac. The purpose is to offer temporary financing to someone whose credit history
disqualifies them for a conforming loan (including someone who has recently filed for
bankruptcy, foreclosure or late payment on their credit report). Typically the interest
rates run higher and vary depending upon the individual credit situation.
FHA Loans
The Federal Housing Authority (FHA), which is part of the U.S. Department of Housing and
Urban Development (HUD), plays a significant role in helping low- to moderate-income
families qualify for mortgages. FHA assists first-time buyers and others who would not
qualify for a conventional loan, by providing mortgage insurance to private lenders.
Interest rates for an FHA loan are usually the going market rate, while the down payment
requirements for an FHA loan are lower than conventional loans. The required down payment
can be as low as 3 percent and the closing costs can be included in the mortgage amount.
VA Loans
VA Loans are guaranteed by the U.S. Department of Veterans Affairs. Service persons and
veterans can qualify for a VA Loan, which usually offers a competitive fixed interest
rate, no down payment and limited closing costs. While the VA does not issue the loans, it
does issue a certificate of eligibility required to apply for a VA loan.
RHS Loan Programs
The Rural Housing Service (RHS), which is part of the U.S. Department of Agriculture,
guarantees loans from private lenders to help low- to moderate income families qualify for
mortgages.
