Medicare Supplement – Insurance Quotes

Everything gets ever more complex by the day, and the mortgage world is no different. No longer can we hope to just be offered a 30 year conventional fixed maturity mortgage as grandma and grandpa were.

Times have changed considerably since grandma and grandpa’s day, and we live with a lot more change. This means we change jobs more and need to move to a new home and that we aspire to more so that we may move because we can afford a bigger home or one in a nicer neighborhood.

The second reason is that the creative financing spirit in the other financial markets has spilled over into the mortgage market, leading to the development of newer, more flexible mortgage products.

Here is a brief synopsis of the various types of mortgages available to the current homeowner.

Today’s mortgages are very different from before.

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

A Government loan is the one that has a guarantee from a government or semi government agency.

Conforming loan: Adheres to the conditions that have been set by the two main government supported entities (GSEs), Fannie Mae and Freddie Mac. These are often called “A” paper conforming mortgages.

B,C loan: A mortgage that does not abide by the conditions set forth by Fannie Mae and Freddie Mac. B and C loans are usually used for borrowers who have bankruptcy, foreclosure or poor credit problems. These loans give temporary financing to these kinds of applicants.

Jumbo loan: A loan that is above the maximum loan amount set by Fannie Mae and Freddie Mac. Jumbo loans therefore have higher interest rates, since the secondary market for them is smaller, and they are not as easily traded.

A fixed rate loan is the kind of loan everyone remembers as the old fashioned type of home loan: a fixed rate mortgage for a certain length of time. The rate is fixed at the beginning of the loan, and therefore the mortgage payments stay the same throughout the term of the loan. Fixed rate mortgages can be for 10, 15, 20, 25, 30 and 40 year terms, but the 15 year and 30 year terms are most common. The shorter the maturity on the mortgage, the better its rate will be because there is less exposure to interest rate changes for the bank.

A Balloon loan is an kind of hybrid between a long term loan, because of its payment schedule, and a short term loan, because of its maturity date. These loans have lower interest rates, but because they have to be fully paid upon maturity, there is a chance that interest rates will be higher when they are paid off.

Adjustable Rate Loan: Banks try to avoid fixing loans for maturities too long since interest rates can increase, so they now deal in ARMs (Adjustable Rate Mortgages), that have interest rates that adjust periodically, based on a certain index such as Treasury Bills or Certificates of Deposit.

In addition to such a large variety of loans available, there are different types of each one, so that a home loan today can be practically tailor made for the borrower. This makes the home loan market even more complicated and filled with problems for the typical consumer, who should consult with a mortgage professional before he makes a decision.

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Tags: Insurance, mortgage rates, mortgages, mortgane loans

This entry was posted on Tuesday, April 6th, 2010 at 5:00 pm and is filed under Insurance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.