TYPES OF MORTGAGE LOANS
Conventional Loan: A home loan that is not insured or guaranteed by the federal government. Contrast with government loan. Can be for conforming or non-conforming loan amounts.
Adjustable Rate Mortgage (ARM): Also referred to as a Variable Rate Mortgage. They both mean the same thing. An ARM is a mortgage with an interest rate that adjusts periodically to reflect changes in market conditions. Your mortgage payments are adjusted up or down (usually on an annual basis) as the interest rate changes. To protect you in a rising interest market, rate increases are limited (usually 2 percentage points annually; 6 percentage points over the life of the loan).
Fixed Rate Mortgage: A mortgage with an interest rate that stays the same (fixed) over the life of the mortgage. Monthly payments for a fixed rate mortgage are very stable and will not change.
First Mortgage (Home Loan): A home loan that is the primary lien against a property.
Convertible ARM: An adjustable rate mortgage (ARM) that can be converted to a fixed rate loan under specific conditions.
Fixed Period ARM: Provides a fixed rate for 3, 5, 7 or 10 years then adjusts annually based on a financial index for the remaining loan term.
Bridge Loan: A type of mortgage financing between the termination of one loan and the start of another loan. For example, a mortgage secured by the borrower’s present home (which is usually up for sale) in a manner that allows the proceeds to be used for closing on a new house before the present home is sold. Also known as a swing loan.
Construction Loan: A short term, interim loan for financing the cost of home construction. The lender makes payments to the builder at periodic intervals as the work progresses.
Conforming Loan: A home loan with a maximum loan amount of $417,000 that is eligible for purchase by FNMA and FHLMC.
Jumbo Loan: Any loan amount in excess of $417,000. Also called a nonconforming loan.