The Types of Mortgages

There are two basic types of mortgages:

  • Conventional
    • A “traditional” mortgage from a commercial lender

      • Loans under 417,000 are considered “Conforming” and are administered by Fannie Mae or Freddie Mac and funded by banks
      • Loans over 417,000 are considered “Jumbo” loans and are funded by the private investment market
      • New rules have increased the amount for a conforming loan, depending on the area, up to 729,000
    • May require the borrower to have private mortgage insurance
    • 15 or 30 year fixed rate mortgages are common along with many types of adjustable rate mortgages and special loan programs.
  • Government Backed
    • Federal Housing Administration (FHA) insures or Veteran’s Administration (VA) guarantees these loans
    • Designed for first-time buyers with small down payments and have easier credit terms. They also allow homeowners with little equity to refinance for a more favorable loan
    • Loan limits vary by community
    • 15 and 30 year fixed are standard, but a 1 year adjustable mortgages is available.

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