Types of Mortgages...
Updated: Apr 11, 2019
Conventional or conforming mortgage loans are private loans that aren’t secured by a government agency and meet guidelines established by Fannie Mae and Freddie Mac. To get approval for a conventional mortgage loan, you must meet FICO score, debt-to-income ratio and loan amount requirements. A down payment of 20 percent is also typically suggested or required.
Even if you owe more than your home is worth, as long as you are a current FHA loan holder, you can apply to refinance your mortgage for a lower rate and payment with the FHA Streamline program. The program has flexible credit and minimal documentation requirements and no required appraisal. Fixed-rate loans are offered in 15- to 30-year terms, and 5-year ARMs are also available.
A cash-out refinance is a mortgage loan that satisfies your current mortgage balance and allows you to use the equity in your home for personal use. This type of loan might make sense for you if you can get a better interest rate than that of your current mortgage, you plan to shorten the term of your loan instead of refinancing for 30 years, and you plan to keep your mortgage for at least several more years.
Home Equity Loans
When you prefer to keep your current mortgage, a home equity loan is an option. Funds are received as a one-time, lump-sum payment. Functioning as a second mortgage, these loans typically have a fixed rate and require that you repay interest and principal each month.
Known as a non-conforming loan, a jumbo loan is a mortgage that exceeds $424,100. Jumbo loans often carry higher interest rates than conventional loans.
To get a lower rate, you can opt for a jumbo ARM. To qualify, you must meet credit history, debt-to-income and loan amount requirements — plus have a substantial down payment.