Types of Real Estate Loans

Home loans are used to finance the purchase of a new or existing home. There are several different types of home loans available, each with its own unique set of features and benefits. In this blog post, we will discuss some of the most common types of home loans.

ADJUSTABLE RATE MORTGAGE

Adjustable rate mortgages have an interest rate that is adjusted at certain intervals based on a specific index during the life of the loan.

BALLOON PAYMENT LOAN

A fixed-rate loan that is amortized over a certain time frame but becomes due and payable at the end of a prior designated time. Can be extendable or may roll over into another type of loan.

BUY-DOWN LOAN

Buy-Down loans are fixed-rate loans where the interest rate and the payment are reduced for a specific period of time by paying the interest upfront to subsidize the lower payment.

COMMUNITY HOMEBUYER'S PROGRAM

A fixed-rate loan for first-time buyers with a low down payment, usually 3-5%, no cash reserve requirement, and easier qualifying ratios. Subject to borrower meeting income limits and attendance of a four-hour training course on home ownership.

CONVENTIONAL LOAN

Conventional loans are sometimes more lenient with the appraisal and condition of the property. When you are buying a “fixer-upper” you may need to use a conventional loan. Homes purchased above the FHA loan limit are usually financed with conventional loans.

FHA LOAN

FHA loans are insured by the Federal Housing Administration under H.U.D. They offer a low down payment and are easier to qualify for than conventional loans. 
FIXED-RATE LOAN 
A fixed-rate loan has one interest rate that remains constant throughout the life of the loan.

GRADUATED PAYMENT MORTGAGE

A fixed-rate loan that has payments starting lower than a standard fixed-rate loan, which then increases by a predetermined amount each year for a set number of years.

NON-QUALIFYING LOAN

Non-Qualifying loans are pre-existing loans that can be assumed by a buyer from the seller of a property without going through the qualifying process. The buyer pays the seller for their equity and then starts making payments.

VA LOAN

VA loans are guaranteed by the Veterans Administration. A veteran must have served 180 days of active service.

Choosing the right type of home loan depends on your financial situation, goals, and preferences. It is important to research and compare different loan options before making a decision to ensure that you are getting the best loan terms and rates for your needs.

We are happy to connect you with one of our preferred lenders to help you find the right loan for your needs. Please reach out to us anytime and we will be more than happy to provide you with referrals. 

Thank you to First Centennial Title Co. for contributing to this blog post.