types of mortgage

In addition to the various kinds of mortgages, you can also apply for a balloon loan or an interest-only mortgage. These types of mortgages are similar to the ones you’d get through banks. These loans typically come with a fixed interest rate and require you to repay them in installments over a specified time period. Another type of mortgage is a home equity line of credit, which works much like a credit card. The funds you receive are available as long as the line of credit is open.

Interest-only mortgages

While interest-only mortgages do have their disadvantages, they are still better than nothing. They can help you save money in the long run, as you only pay interest on your loan. However, one big drawback of this mortgage type is that you won’t build equity in your home, since you’re only paying interest. This type of mortgage will last up to 10 years. Therefore, it’s best for people who are confident that their income will increase over time.

One of the main disadvantages of interest-only mortgages is that they may not be as attractive as they first appear. Interest-only mortgages are not advisable for those who don’t have the financial ability to make the regular amortized payments. While initial payments are smaller, the total amount of interest paid will be much higher. Moreover, it may be difficult to refinance the loan when the value of the home decreases.

Interest-only mortgages are adjustable-rate mortgages that only include the interest payments for a period of time. Typically, these terms are between five and 10 years. During this time, monthly payments are lower than in a traditional mortgage. However, they will eventually become fully amortized once the interest rate adjusts. Then, the monthly payment will be higher than it would be if the loan had been fully amortized from the beginning.

Balloon loans

A mortgage is the most common example of a balloon loan. Unlike a traditional mortgage, the payments for a balloon loan are not structured to pay the entire amount in a single payment. Instead, the borrower pays a fixed percentage of the loan amount over the term of the loan and the remaining balance is paid off at the end. To figure out how much you can expect to pay over the balloon loan term, use the mortgage calculator below.

Another option for financing a balloon is an adjustable-rate mortgage. This mortgage offers the borrower a flexible interest rate and allows him to pay off the entire loan at a lower rate of interest than the original mortgage. Unfortunately, some balloon loans come with disadvantages. The borrower cannot re-borrow from the same lender or another institution. If they default on the loan, they risk losing the home. But balloon loans do offer many benefits.

Many people confuse adjustable-rate mortgages and balloon loans. ARMs offer borrowers a set rate of interest for a set period of time, typically one to five years. However, the interest rate can change several times throughout the term, depending on the borrower’s credit rating and market conditions. The borrower is expected to pay off the balloon payment during the term of the loan, and refinance at the end of the term if they cannot.

Conforming loans

A conforming loan is a loan that complies with federal guidelines for a given type of mortgage. A conforming loan is similar to a conventional mortgage, but is backed by a government-backed guarantee, such as Fannie Mae and Freddie Mac. In the U.S., the conforming loan limit is $484,350. In competitive housing markets, however, the loan limit can rise to $700,000 or even more. In Alaska and Hawaii, conforming loan limits are higher, with jumbo mortgages exceeding $700,000.

Although Fannie Mae and Freddie Mac’s products are very similar, there are some differences between them. If you have an unusual need, make sure to read the fine print and discuss your options with a loan officer. For example, Freddie Mac offers versions of most conforming loans under different names, including HomeReady, CHOICERenovation, and Homestyle. This means that borrowers with special needs may have a better chance of qualifying for a conforming loan.

Choosing a conforming loan depends on your individual finances and debt-to-income ratio. Higher credit scores and larger down payments lower your interest rates. When you apply for a conforming loan, a lender may require you to pay private mortgage insurance (PMI) if you don’t have 20% down. Despite its cost, this insurance can be removed later if you need to refinance the loan. The difference between a conforming loan and an FHA mortgage is that private mortgage insurance is permanent whereas FHA mortgage insurance is temporary.

Nonconforming loans

There are three types of mortgage loans: conforming, nonconforming, and jumbo. Conforming loans require a lower debt-to-income ratio than jumbo mortgages, but you may still qualify for a nonconforming mortgage if you have a higher DTI ratio or lower credit score. Jumbo loans, on the other hand, have a higher loan limit and require a larger down payment.

Conforming mortgage loans are sold to Freddie Mac and Fannie Mae, and are not considered nonconforming. However, you should be aware that these loans carry extra red tape and rigid underwriting that may make your loan fall through. Additionally, lenders may be less willing to work with sellers if your loan does not conform to the guidelines of the government-sponsored mortgage agencies. Therefore, it is best to avoid conforming mortgage loans unless they are your only option.

A nonconforming mortgage loan is a type of conventional mortgage loan that does not meet the underwriting requirements set by the government. The federal agencies that set the limits on conforming loans set them every year. Conforming loans meet all of the guidelines set by Fannie Mae and Freddie Mac, which are two government-sponsored mortgage agencies. Nonconforming mortgages, by contrast, do not meet the guidelines set by the federal government and are not insured.


While the interest rate for an ARM is generally lower than for a traditional loan, you might not realize that rates can increase during the loan term. You may be able to afford lower payments at the beginning of the loan, but if the rates increase, you may find yourself unable to keep up. Although the adjustable-rate mortgage adjusts on a predetermined schedule, you need to know that the interest rate may increase after the initial fixed period, which many borrowers do not realize. Although the interest rates for all types of adjustable-rate mortgages adjust on a fixed schedule, each type is different.

The interest rate on an ARM changes depending on the benchmark rate, which is often the certificate of deposit or the Secured Overnight Financing Rate. If the benchmark rate goes up, so does the new interest rate. The new interest rate will be the benchmark rate plus a margin, meaning that a 5% benchmark rate would be equal to 6%. In most cases, parties agree on a maximum interest rate increase, usually over the life of the loan. For this reason, many people choose an ARM over a fixed-rate mortgage.

VA loans

VA loans are different than conventional mortgages in several ways. In addition to having competitive interest rates, VA loans are also backed by the government, preventing lenders from charging excessive closing costs. However, lenders must still charge certain fees, including a lender origination fee. In most cases, borrowers are not required to pay this fee, as VA limits lenders’ fees to one percent of the loan amount. A VA loan does not require an upfront fee, but closing costs can range from two percent to six percent of the loan amount.

The first step to qualifying for a VA loan is completing a Certificate of Eligibility. This can be done online or by mail, and will require a variety of information, depending on your status. Typically, veterans and active duty service members must provide their discharge papers, as well as a signed statement stating that they are a veteran. However, if you are in the market for a home but are unsure if you qualify, fill out a pre-qualification form to be sure you qualify.

When it comes to qualifying for VA home loans, the requirements are straightforward. Typically, VA loans require no down payment and a low debt-to-income ratio (DTI). The VA recommends a maximum DTI of 41%, although there are exceptions for residual income. The DTI ratio varies by location and home size, but is generally between eighty-five and ninety-five percent. If you are planning to apply for a VA mortgage, NBKC Bank is a great option.

USDA loans

USDA mortgages are a good option for borrowers with poor credit. These mortgages require no down payment and roll closing costs into monthly payments. They are also available to first-time homebuyers and those with damaged credit. If you’re considering a USDA mortgage, here are a few things to keep in mind. USDA mortgages are 100% loan-to-value, which means you can finance up to $27,500 of home improvement costs. And unlike FHA mortgages, USDA mortgages are assumable. In other words, you can transfer the mortgage to future buyers, with the same interest rate.

USDA mortgages offer the same benefits as conventional loans, but have certain eligibility requirements. You must live in a rural area to qualify for one of these mortgages. You can check whether your address qualifies by visiting the USDA website. Remember that the USDA definition of “rural” is extremely broad, and many suburbias fall into this category. But, if you’re interested in obtaining USDA mortgages, remember that you can get the loan you need to buy a home.

One of the benefits of USDA loans is that there’s no down payment. This is a huge benefit for buyers with low credit scores. But USDA loans don’t come with a perfect guarantee. You’ll need to meet certain income criteria, such as a low DTI ratio, and have a reasonable credit score. The down payment requirement can be a barrier for many people. Fortunately, USDA mortgages don’t require a down payment. You can even get a mortgage with no money down.