It seems like everything in the world is becoming complicated nowadays, and mortgage loans are not an exception to the rule. If you are shopping for a mortgage today, don’t expect that the only one you will see is the standard fixed rate, thirty year mortgage that grandpas had in the old days.

Times have changed a lot since grandma and grandpa’s day, and we exist with a great deal more change. We change jobs more frequently, and so we have to change homes and we like to move to bigger and bigger homes as we earn more and more income.

Home loans have also become more complicated because competition has spurred mortgage lenders to come up with ever more innovative products.

If you would like a short outline of the types of home loans you may expect to see, take an aspirin and continue.

Grandpa and Grandma had luck.

Conventional loan: Any mortgage that is not guaranteed by a government entity.

Government loan: The opposite, a mortgage that is backed by a guarantee from some government entity.

Conforming loan: Any conventional loan that abides with the terms and conditions set forth by the quasi-government guarantee agencies Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Association). There are often referred to “A” paper mortgage loans.

B and C loans have no kind of guarantees from companies such as Fannie Mae or Freddie Mac, and therefore will not “conform”. These types of mortgages are usually the ones given to borrowers with poor credit scores, or who have even experienced bankruptcy. often, they are used as temporary mortgages until a conforming mortgage can be put in place.

Jumbo loan: A loan that is above the maximum loan amount set by Fannie Mae and Freddie Mac. A jumbo mortgage will carry a higher interest rate since the market in these loans is somewhat illiquid.

Fixed rate loans: This is the traditional mortgage such as grandpa would have known about-fixed term, fixed rate. The one really good thing most people like about this type of mortgage is that the payment stays the same every month. They are available in terms as short as 10 years, and as long as 40 years, but they usually have 15 or 30 year maturities. If you have a mortgage with a shorter maturity, you will usually have a loan with a lower rate and the reason for this is that banks can’t fix low rates too far in advance.

Balloon loan: The rate on this mortgage is fixed, so the mortgage payment is fixed, but it has much shorter maturities than fixed rate loans. The monthly payments are amortized using a 30 year loan amortization, but the mortgage is They may have maturities of three to seven years, but the mortgage is paid as if the maturity is 25 or thirty years. Interest rates are better on these mortgages, but of course the risk of rates being higherworse when they have to be paid off is a consideration.

{Adjustable Rate Loan: This loan solved the issueeof banks having to take undisireable risks on the direction of interest rates, since the rate is changed periodically over the life of the mortgage, based upon a pre-determined index, such as
Treasury Bills, Certificates of Deposit, Cost of Funds Index, the Prime Rate and others.|Adjustable Rate Loan: Since lenders try to limit the amount of interest rate volatility they are exposed to, they today prefer to lend with changing rate mortgages, where the rate on the loan is adjusted at fixed intervals, based on a standardized index (TBills, CDs, etc.).|Adjustable Rate Loan: Banks prefer to avoid fixing loans for maturities too long because interest rates can increase, so they now deal in ARMs (Adjustable Rate Mortgages), that have interest rates that change periodically, based on a certain index such as Treasury Bills or Certificates of Deposit.|An Adjustable Rate loan doesn’t act like you will have a low rate for a long period, since you agree th

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