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Mortgage Loan Programs For Different Borrowers




Types of Mortgages

Mortgages come in a variety of forms. The most common types are 30-year and 15-year fixed-rate mortgages. Some mortgage terms are as short as five years while others can run 40 years or longer. Stretching payments over more years may reduce the monthly payment, but it also increases the total amount of interest the borrower pays over the life of the loan.


The following are just a few examples of some of the most popular types of mortgage loans available to borrowers.


Fixed-Rate Mortgages

With a fixed-rate mortgage, the interest rate stays the same for the entire term of the loan, as do the borrower's monthly payments toward the mortgage. A fixed-rate mortgage is also called a traditional mortgage.


Adjustable-Rate Mortgage (ARM)

With an adjustable-rate mortgage (ARM), the interest rate is fixed for an initial term, after which it can change periodically based on prevailing interest rates. The initial interest rate is often a below-market rate, which can make the mortgage more affordable in the short term but possibly less affordable long-term if the rate rises substantially.


ARMs typically have limits, or caps, on how much the interest rate can rise each time it adjusts and in total over the life of the loan.


Interest-Only Loans

Other, less common types of mortgages, such as interest-only mortgages and payment-option ARMs, can involve complex repayment schedules and are best used by sophisticated borrowers.


Many homeowners got into financial trouble with these types of mortgages during the housing bubble of the early 2000s.1


Reverse Mortgages

As their name suggests, reverse mortgages are a very different financial product. They are designed for homeowners 62 or older who want to convert part of the equity in their homes into cash.


These homeowners can borrow against the value of their home and receive the money as a lump sum, fixed monthly payment, or line of credit. The entire loan balance becomes due when the borrower dies, moves away permanently, or sells the home.


Where Can I Get a Mortgage?

Mortgages are offered by a variety of sources. Banks and credit unions often provide home loans. There are also specialized mortgage companies that only deal specifically with home loans. You may also employ an unaffiliated mortgage broker to help you shop around for the best rate among different lenders.

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