Information on the various types of loans. With tighter restrictions and lending guidelines, many of these loan programs are no longer available, or more difficult to obtain. Talk with a lender to find the right loan for you.
ADJUSTABLE RATE 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 this is amortized over 30 years but becomes due and payable at the end of a certain term. May be extended 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 up front to subsidize the lower payment. A fixed rate loan for first time buyers with a low down payment, usually.
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 are Conventional loans.
FIXED RATE LOAN: Fixed rate loans have 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 pre-determined amount each year for a set number of years.
INTEREST ONLY LOAN: The borrower only pays the interest on the mortgage through monthly payments for a term that is fixed on an interest-only mortgage loan. The term is usually between 5 and 7 years. After the term is over, many refinance their homes, make a lump sum payment, or they begin paying off the principal of the loan.
MORTGAGE CREDIT CERTIFICATE: A first time homebuyer program subject to purchase price and income limits. They are limited to Alameda, Contra Costa, San Mateo and Santa Clara counties. It is actually a special tax credit and assists the buyer in qualifying for many loan programs.
NON-QUALIFYING LOAN: Non-qualifying loans are pre-existing loans which 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 the payments.
VA LOAN: VA loans are guaranteed by the Veterans Administration. A veteran must have served 180 days active service.
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 of $625,500 are usually financed with conventional loans.