| Copyright RebuildCreditScores 2008. All Rights Reserved |
Mortgage Loans: Learn the various types of mortgage loans
by Lisa Phillips
by Lisa Phillips
Buying a home is an investment, and any investment requires a good amount of research.
Home shoppers can get caught up in the excitement of shopping for a home and this is quite
understandable.
Home shoppers can get caught up in the excitement of shopping for a home and this is quite
understandable.
1. How long do you expect to live in the home?
2. Are your finances expected to change over time?
3. Your credit history and credit score.
4. Would you be comfortable with a changing mortgage payment or do you prefer to have the
same payment amount over the life of the loan?
Although your lender, a mortgage broker or bank loan officer can answer many questions for
you, it’s still important to invest time in some research before you begin the loan process. A
little research will go a long way in keeping you abreast of your options.
Basic Loan Categories
Conforming Loans
Conforming loans follow the guidelines set forth by Fannie Mae and Freddie Mac. Fannie Mae
and Freddie Mac are corporations which purchase loans by complying with the guidelines and
terms from mortgage lending institutions. Loans are packaged into securities and sold to
investors. Many consumers are able to obtain mortgage credit because Fannie Mae and
Freddie Mac provide affordable funds for home financing. Conforming loans account for the
majority of U.S. mortgage loans.
Fannie Mae and Freddie Mac establish borrower guidelines for the maximum loan amount,
credit and income requirements and property types. New loan limits are announced yearly. To
get a current, state-by-state gudeline visit the FHA website. For high cost areas the limits
have been temporarily increased.
2. Are your finances expected to change over time?
3. Your credit history and credit score.
4. Would you be comfortable with a changing mortgage payment or do you prefer to have the
same payment amount over the life of the loan?
Although your lender, a mortgage broker or bank loan officer can answer many questions for
you, it’s still important to invest time in some research before you begin the loan process. A
little research will go a long way in keeping you abreast of your options.
Basic Loan Categories
Conforming Loans
Conforming loans follow the guidelines set forth by Fannie Mae and Freddie Mac. Fannie Mae
and Freddie Mac are corporations which purchase loans by complying with the guidelines and
terms from mortgage lending institutions. Loans are packaged into securities and sold to
investors. Many consumers are able to obtain mortgage credit because Fannie Mae and
Freddie Mac provide affordable funds for home financing. Conforming loans account for the
majority of U.S. mortgage loans.
Fannie Mae and Freddie Mac establish borrower guidelines for the maximum loan amount,
credit and income requirements and property types. New loan limits are announced yearly. To
get a current, state-by-state gudeline visit the FHA website. For high cost areas the limits
have been temporarily increased.
Jumbo Loans
Jumbo loans are non-conforming loans that exceed the maximum loan amounts established
by Fannie Mae and Freddie Mac. These larger loans are considered riskier and carry a
higher interest rate than a conforming loan. The difference between the two rates depends
on the current market price. Jumbo loans are bought and sold on the market on a smaller
scale. Lenders prefer to have a higher down payment from borrowers when jumbo loans are
requested.
Portfolio Loans
Portfolio loans do not conform to traditional guidelines such as Fannie Mae and Freddie
Mac and do not meet basic underwriting guidelines of standard conventional loan programs.
The portfolio lender will not sell your loan to any other investor, it will remain in the lender’s
portfolio to earn money off the interest of your loan. Portfolio loans provide more flexibility to
borrowers to finance properties that do not meet conventional loan program guidelines.
Government Loans
The two most common government loans are Federal Housing Authority (FHA) and
Department of Veterans Affairs (VA) loans. These loans have specific underwriting
requirements for borrowers.
Jumbo loans are non-conforming loans that exceed the maximum loan amounts established
by Fannie Mae and Freddie Mac. These larger loans are considered riskier and carry a
higher interest rate than a conforming loan. The difference between the two rates depends
on the current market price. Jumbo loans are bought and sold on the market on a smaller
scale. Lenders prefer to have a higher down payment from borrowers when jumbo loans are
requested.
Portfolio Loans
Portfolio loans do not conform to traditional guidelines such as Fannie Mae and Freddie
Mac and do not meet basic underwriting guidelines of standard conventional loan programs.
The portfolio lender will not sell your loan to any other investor, it will remain in the lender’s
portfolio to earn money off the interest of your loan. Portfolio loans provide more flexibility to
borrowers to finance properties that do not meet conventional loan program guidelines.
Government Loans
The two most common government loans are Federal Housing Authority (FHA) and
Department of Veterans Affairs (VA) loans. These loans have specific underwriting
requirements for borrowers.
2008 Guidelines
|
 |  |  |  |  |  |  |  |  |  |
However, a major portion of your research
should be concentrated in the area of
mortgage loans before you even began to
shop for a home.
There are so many types of home loans.
The only common thread between
mortgages is that they are either fixed
rate mortgage loans or adjustable rate
mortgage loans.
The type of mortgage loan you get will
depend on your financial situation mainly;
however, there are a few factors you
should take into consideration:
should be concentrated in the area of
mortgage loans before you even began to
shop for a home.
There are so many types of home loans.
The only common thread between
mortgages is that they are either fixed
rate mortgage loans or adjustable rate
mortgage loans.
The type of mortgage loan you get will
depend on your financial situation mainly;
however, there are a few factors you
should take into consideration:
Types of Mortgage Loans