Types of Mortgage Home Loans

Adjustable Rate Mortgage (ARM): A mortgage which begins with a low interest rate, fixed for a specified initial period of the loan term, then "adjusts" at specified intervals during the remainder of the loan term. Adjustments are based on an "index" (the value of which can change over time) plus a "margin." The index plus the margin determine the fully adjusted rate, which is typically subject to certain limits (ceilings and floors). These limits are referred to as "caps."

Fixed Rate Mortgage: A mortgage with monthly payments that remain the same throughout the life of the loan because the interest rate is fixed.

Balloon Mortgage: A mortgage which typically offers low, fixed rate payments as though the mortgage was scheduled on a 30 year term. But instead, the loan has a shorter term (for example, 5, 7 or 10 years) which ends with a single large payment (a "balloon payment") for all the remaining principle.

FHA Mortgage: A mortgage for which the lender is insured against loss by the Federal housing Administration, with the borrower paying the mortgage insurance premium. The major advantage of an FHA mortgage is that the required down payment is very low, however, the maximum loan limit is also low.

VA Mortgage: A mortgage for which the lender is insured against loss by the Veterans Administration. The primary advantage of such a mortgage is that the borrower can put little or no money down. While the maximum loan limit is greater than that of an FHA mortgages, the borrower still needs to pay the mortgage insurance premium. Only Veterans are eligible for this type of mortgage.
Mortgage Home Loan Glossary Below

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