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Mortgage and You - What you should know about your Mortgage Loan



Different types of mortgage loan and their features

There are different types of mortgage loan available in the market. In order to choose the right kind of mortgage, you should take into account a number of factors. You should decide what type of mortgage loan is appropriate for you according to your financing need and repayment capacity.

What are the different types of mortgage loan that are available?

Mortgage loans are available for the borrowers in different forms and with distinctive features. You should take help of the various online resources to find out which is the most appropriate mortgage option for you. You can also avail the assistances from the mortgage loan counselors of different agencies.

In the United States, mortgage loans can be broadly categorized into two types; Government mortgage loans and conventional mortgage loans. Any mortgage loan which is not a VA (Veterans Administration) loan, FHA (Federal Housing Administration) loan or RHS (Rural Housing Service) loan is considered to be a conventional loan.
           
Usually, the different types of mortgage loans can be delineated as follows:

Fixed rate mortgage loan (FRM): This is the most popular form of mortgage loan. Here, the interest rate and the monthly payments are fixed for the entire loan term. You can avail a fixed rate mortgage loan for 10, 15, 20, 25, 30, or 40 years.

Adjustable rate mortgage loan (ARM): This loan is also termed as variable rate or floating rate mortgage loan. The interest rate and consequently, the monthly payments for an adjustable rate mortgage vary throughout the term period of the loan. On an average, the adjustable rate mortgage loans are offered with a term period of 30 years.

FHA loan: This loan is offered by the Federal Housing Administration or FHA, which is a division of the United States Department of Housing and Urban Development (HUD). You will find that qualifying for an FHA loan is easier in comparison to the conventional loans and the down payment is also not that high.

VA loan: This loan is insured by the Department of Veterans Affairs in the United States. This guarantee enables service persons and veterans to avail home mortgage loans under suitable terms and conditions and normally no down payment is required for them. Qualifying for this loan is quite easy, as well.               

RHS loan: This loan is backed by the Rural Housing Service (RHS) under the United States Department of Agriculture. It is a useful mortgage loan option for the rural inhabitants because no down payment is necessary and the closing cost is also nominal.  

Other types of mortgage loan

Besides these loans, there are other types of mortgage loans which include the following:

  • Interest only mortgage loan
  • Commercial mortgage loan
  • Balloon mortgage loan
  • Buydown mortgage loan
  • Jumbo mortgage loan
  • Home equity loan
  • Reverse mortgage loan
  • Wraparound mortgage loan
  • Non-conforming mortgage loan
  • Option ARMs (adjustable rate mortgages)
  • Bad credit mortgage loan
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