When it comes to real estate loans, you’ll find that there are many options. Figuring out which loan or loans are best for your new property purchase can be confusing, but we can help. Here are some types of loans you might investigate.
Conforming Loan: When a loan conforms to the guidelines of FNMA/FHLMC (Fannie Mae/Freddie Mac) in both terms that may be purchased by FNMA or FHLMC it is conforming. Loans that do not match these guidelines are non-conforming loans. If the loan does not conform due to its amount, it is a Jumbo Loan. Conforming loans may have either fixed interest rates or adjustable interest rates.
Conventional Mortgage Loan: When the loan amount is within the FNMA/FHLMC guidelines, and the federal government does not insure or guarantee the lender payment through the FHA or VA, the loan is conventional). Conventional loans may have either fixed interest rates or adjustable interest rates.
FHA Insured Loan: Loans insured by the Federal Housing Administration. Borrowers must meet specific criteria to qualify. FHA loans often require lower down payments.
VA Loan: A VA loan is a mortgage loan offered to American Military and veterans guaranteed by the U.S. Department of Veterans Affairs (VA), typically at preferred interest rates and/or low to no down payment requirements.
Mortgage Rate Terms
Fixed-Rate Mortgage: A loan secured by real estate that has a fixed interest rate and payment amount for the term of the loan (normally 15 or 30 years) is a fixed-rate mortgage.
Adjustable-Rate Mortgage also called ARM or variable rate mortgage: ARMs have interest rates that can vary or adjust at pre-determined intervals. Often the original rate and payment are lower, allowing borrowers to qualify more easily. The adjustment basis is an index, often the LIBOR—which stands for The London Interbank Offered Rate, or on the prime rate—the lowest rate of interest banks offer their most credit-worthy customers.
Fully Amortizing Mortgage: A fully amortizing mortgage is a mortgage with scheduled uniform payments that will fully pay-off the loan over the term of the mortgage.
Construction Loan: Short-term loans to funds construction or improvements are construction loans. Typically, the construction loan is repaid with the mortgage.
Home Equity Loan: A home equity loan is a loan made against the equity in a home. The borrower may utilize some or all of the loan and pays interest only on the portion used.
Refinancing: Refinancing are the proceeds of a new loan used to pay off an existing mortgage on the same property.
Fannie Mae is a nickname for FNMA — the Federal National Mortgage Association. FNMA is a privately owned corporation. It purchases FHA, VA, and conventional mortgages.
Freddie Mac is the nickname for FHLMC — the Federal Home Loan Mortgage Corporation. FHLMC is a corporation owned completely by the Federal Home Loan Bank System. FHLMC purchases FHA, VA, and conventional mortgages.
If you’re thinking of buying, let’s talk! We’d love to talk and see if Norhill Realty is the right firm to help you with your home search. Fill out the form below to get matched with an agent to learn more about the home buying process.
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