What Does That Mean – Mortgage Type

Multiple options are available when it comes to real estate loans. Figuring out which one you need can be disconcerting, to say the least. So, if you’re new to the game, here’s a quick guide to help you along. 

Standard Mortgages:

  • Conventional – Loans that fall within the FNMA/FHLMC (Fannie Mae/Freddie Mac) guidelines where the Federal government is not insuring the payment through the VA or FHA loan process are known as conventional loans. A conventional loan has either a fixed or an adjustable interest rate, and typically requires ten to twenty percent downpayment.
  • Conforming – When a loan conforms to guidelines set by FNMA/FHLMC (Fannie Mae/Freddie Mac) where either Fannie Mae or Freddie Mac could later purchase the loan, it is said to be conforming. A non-conforming loan would be any loan that does not fit the guidelines, so a Jumbo Loan, for example, would be outside the scope of FNMA/FHLMC because of its size.
  • FHA Insured – Loans that are insured by the Federal Housing Administration (FHA) are made to borrowers meeting specific criteria and often require lower down payments.
  • VA – American military personnel and veterans may obtain a mortgage through the U.S. Department of Veteran Affairs (VA) as typically preferred interest rates and/or no or lower down payments.

Specialty Mortgages:

  • Reverse Annuity – This particular mortgage is for seniors on a fixed income and is used to generate monthly revenue from the equity in their home. They continue to live in the house as they like, but ownership reverts to their lender once they move from the home or pass away.
  • Wrap around – Sometimes, a homeowner needs to sell, but chooses to keep a preferential mortgage on the home, so the buyer pays a mortgage payment that covers both the original mortgage and the amortized difference between the existing mortgage and the selling price. The seller is considered to have loaned the “wrap around” amount to the buyer.
  • Balloon – A balloon mortgage is a loan with a short (three years, perhaps) term that has a fixed principal and interest monthly payment that typically is not fully amortized. At the end of the term, the rest of the mortgage is due in a single (balloon) payment at which time buyers typically refinance. These loans are useful for buyers that intend to sell within the balloon period at an appreciation value (such as for a longer fixer-upper), or who could not qualify for a conventional loan at the time but expect that situation to change during the length of the mortgage.
  • Graduated Payment – Sometimes a loan is structured so that earlier payments are lower than later payments and the payments increase on a scheduled basis.
  • Refinance – A refinance is a mortgage taken out to replace an existing mortgage. Homeowners sometimes add more money from the home’s equity onto the loan to complete home improvements.

Short-Term Home Loans:

In addition to full mortgages, there are several short-term loans that homeowners may take in special situations. These include bridge loans (between buying and selling on contingency), construction loans, non-recourse loans (rare, and when the buyer has no responsibility for payment), and home equity loans or lines of credit based on the value difference between the amount owed on the home and its current fair market value.

If you’re wondering what type loan is right for you, speak to a mortgage professional about your situation and get pre-approved.

Strategies for Paying Off Your House Fast

You might think those people who own houses saved up until it got to the right amount. Well, this might be possible, but it is difficult to achieve since the temptation to use the money and unforeseen expenses may arise. So how do most people acquire a house? In America today, the quickest path to homeownership is by a mortgage.

For clarity, a mortgage is a loan from a financial institution or lender that helps the borrower to buy a house. While taking a mortgage may seem like an excellent idea, like every debt, you would want to pay this mortgage off as promptly as possible. So if you are nursing the thought of a mortgage or you are finding it difficult to pay off your mortgage in this post, you will find tips you can use to take control of your money goals and pay off your house early. Here are six practical ways to get there faster:

Switch to Bi-Weekly Mortgage Payments

By dividing your monthly house payment in half and choosing to pay every two weeks, you can relieve yourself of financial stress in two ways. Firstly, this extends the cash flow demand required to pay your monthly bill and secondly, it will help slip an extra monthly-equivalent payment annually.

Refinance to a 15-year Mortgage

Another easy way to pay off your house in no time is to refinance your mortgage from the traditional 30-year mortgage to a 15-year term Doing this will offer you a lower interest rate as well as save you a significant amount of money in interest throughout your loan.

Pay extra each month

Adding $50 to your budget is not too much, but when you continuously add this amount or more to your mortgage payment, it can make a massive difference. Although it might look simple to do, it requires a lot of discipline and commitment.

Bring your lunch to work

Coming to work daily with a brown bag can do you more good other than filling your stomach. By packing a lunch instead of buying from restaurants, you save up a reasonable sum of money that you might put toward paying off your mortgage early.

Put your windfalls into your mortgage

Most taxpayers receive a tax refund each year. If you can utilize all or some of that money as a form of extra payment on your mortgage, you will make rapid progress in paying your house fast.

If you’re looking to purchase a home and don’t want a 30-year payment, consider these factors when determining how much house payment you can afford.

The Intangibles of Buying vs. Renting

Dollar for dollar, you might determine that in this year, at this time, buying might be more to your advantage than renting. Alternatively, the numbers may show the opposite: that renting will save you money this year over buying. Given the conventional wisdom that buying is better on the one hand with your bottom line on the other, how do you decide?

The tangibles or the intangibles

Take the example of two identical homes in the same neighborhood. One is for rent, and the other is for sale. Do you choose to rent or to buy?

If tangibly (things you can accurately calculate) the dollars show that renting is less financial outgo (bottom line) than buying, you may choose to rent. However, buying might offset these tangibles with intangibles such as pride of ownership, the ability to make changes and upgrades, or the stability that comes with a fixed mortgage payment.

On the other hand, it might be that dollar for dollar, it would be less expensive for you to buy the home. In that case, is buying always the right decision? That depends. If you are new to an area, you may not be sure that this is the neighborhood for you. Renting for six months or a year gives you an out should you decide that you do not like it there. Perhaps the school does not have the right programs for your child, or you find the commute is too long to your place of work. Until you experience them, you may not be able to determine how these intangibles might affect you. 

Another intangible is flexibility. If you are nearing starting a family, or conversely of becoming empty-nesters, locking down a home via purchase might not be the best choice, because you will have more options in just a year or two. Moreover, if you need to move, repeatedly buying and selling homes produces extra costs in addition to the down payment that you would not have as a renter that needs to move. These include broker and agent fees and closing costs.

Of course, as a renter, you always should prepare for the possibility of your rent increasing with each rental contract or lease. Also, your property owner could decide not to renew your lease for any number of reasons, so you may need to calculate the cost of moving every year or two as well.

Before taking the leap into home ownership or determining to stay in the rental market, talk with a financial professional to determine which scenario best meets your current and future needs.

How To Buy A For Sale By Owner Home

If you’re searching for a home and are looking for a deal, you may turn to homes that are listed as “For Sale By Owner.” These homes tend to be a great deal for the sellers, but not necessarily the buyer. This makes it all the more important that you hire a buyer’s agent for yourself. Your agent can check a bit of the work that the owner is doing without hiring a real estate agent for himself. When buying a for sale by owner property you’ll want to do all of the same things that you would do if you were buying a property that was for sale through a realtor including:

  • Check the asking price through comps
  • Get a property inspection
  • Make an offer and complete contract negotiations
  •  Check how long the home has been on the market

Just because a home is for sale by an owner, there’s no need to give up on the normal procedures that one goes through in buying a home. You have the right to have a buyer’s agent represent you in the transaction. Beware though as some for sale by owners are not willing to pay commission to any agents including buyers‘ agents. Be sure that the contracts are clear in this area so that you don’t fall in love with a home only to find out that you can’t use your agent in the transaction.

Other Points To Consider In A For Sale By Owner Transaction


You may need to hire an attorney, especially for an estate sale or short sale. 

You still need a home inspection and have the right to back out of the sale if something isn’t satisfactory about the home. The home inspection is important because it can reveal serious problems with a home such as high levels of radon, issues with the furnace, or a possible plumbing disaster waiting to happen.           

You may want a C.L.U.E. Report 

This type of report tells you what kind, if any, insurance claims have been made on the property in the past 5 years. The report will detail the date of the claim, the cause (if a natural disaster) and the amount that was paid to fix the damage. 

You should still get pre-approved

Getting pre-approved before buying a home is just something that should be automatic for buyers. It really lets the seller know that you’re serious about purchasing a property.

Buying a for sale by owner home is the same as purchasing any other property. You’ll just need to be an informed buyer through the process in order to make sure you’re doing what’s right for you.