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Common Types of Mortgages - What Do They Mean?

Tuesday, December 19, 2023   /   by Meghan McDowell

Common Types of Mortgages - What Do They Mean?

There are several types of real estate mortgages in the United States, each designed to meet the specific needs of borrowers.

  1. Fixed-Rate Mortgage (FRM):

    • The interest rate remains constant throughout the loan term.
    • Monthly payments remain the same, providing predictability for budgeting.
  2. Adjustable-Rate Mortgage (ARM):

    • The interest rate is variable and can change periodically based on market conditions.
    • Typically, there is an initial fixed-rate period followed by adjustments.
  3. FHA Loans (Federal Housing Administration):

    • Insured by the Federal Housing Administration.
    • Often suitable for first-time homebuyers with lower down payment requirements.
  4. VA Loans (Department of Veterans Affairs):

    • Available to eligible veterans, active-duty service members, and surviving spouses.
    • Usually offers favorable terms, including no or low down payment.
  5. USDA Loans (U.S. Department of Agriculture):

    • Designed for borrowers in rural areas who meet income and property eligibility criteria.
    • Can offer low or zero down payment options.
  6. Conventional Loans:

    • Not insured or guaranteed by government agencies.
    • Typically require higher credit scores and larger down payments compared to government-backed loans.
  7. Interest-Only Mortgage:

    • Borrowers pay only interest for a specified initial period (e.g., 5 or 10 years).
    • After the interest-only period, payments include both principal and interest.
  8. Balloon Mortgage:

    • Offers lower monthly payments for a fixed period, after which the remaining balance becomes due in a lump sum (balloon payment).
    • Often used by borrowers who plan to sell or refinance before the balloon payment is due.
  9. Reverse Mortgage:

    • Available to seniors aged 62 and older.
    • Allows homeowners to convert home equity into cash, with loan repayment typically deferred until the borrower sells the home, moves, or passes away.
  10. Jumbo Loans:

    • Loans that exceed the conforming loan limits set by government-sponsored enterprises like Fannie Mae and Freddie Mac.
    • Typically used for high-value properties.
  11. Interest-First Mortgage:

    • Borrowers pay interest only for a specified period, followed by payments of both principal and interest.

It's important for potential homebuyers to carefully consider their financial situation and goals when choosing a mortgage type. Additionally, mortgage terms and availability may vary based on the lender and current market conditions.

Give us a call today to determine which mortgage type best suits your needs!


  mortgage, home loans, financing

Keller Williams | Hutch & Howard
11400 Parkside Drive, Suite 120
Knoxville, TN 37934
865-966-5005

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Information is provided exclusively for consumers’ personal use and may not be used for any purpose other than to identify prospective properties consumers may be interested in purchasing. Data is deemed reliable, but is not guaranteed accurate by the MLS. Copyright 2024 Great Smoky Mountains Association of REALTORS®. All rights reserved. Data last updated April 14, 2024
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