Mortgage Types

There are many different types of mortgages. The most common mortgages today include: Adjustable Rate Mortgages (ARM), Fixed-Rate Mortgages, Baloon Mortgages and No/Low Down Payment Mortgages.

ARM is popular because of the relatively lower interest rate, compared to fixed-rate mortgage loans. However the interest rate on an adjustable rate mortgage changes periodically. When interest rates increase, the monthly payment will increase and when interest rates drop, you will save money with lower payments. ARM is a good choice if you expect to live in your house less than five years. The most common types of ARM are 7/1 ARM, 5/1 ARM, 3/1 ARM and 1/1 ARM.

Fixed Rate Mortgages offer stability and certainty. Your interest rate and monthly payment remain the same over the life of the loan. A fixed-rate mortgage is a good choice if you plan to own your house for more than five years. It will also protect you from rising interest rates and inflation. Most popular fixed-rate mortgages are for 10, 15, 20 and 30 year maturity periods.

Balloon Mortgages. Monthly payments are calculated over 30 year amortization period. The unpaid principal balance is due in full after a fixed period (usually 5 or 7 years).

No/Low Down Payment Mortgages allow you to minimize or even eliminate down payment. Most popular programs include FHA, VA loans and different local and combination programs.

To learn more about all types of mortgages, visit the Fannie Mae site!