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.

Planning for A Home Appraisal

The home appraisal is the process of re-evaluating or revaluing your property to determine the market value either because you want to put the house up for sale or because you want to refinance your mortgage. When you put up your property for sale, you want to have it appraised by a professional as this will give you a fair idea of how much your property is worth.

Financial institutions giving out loans order a home appraisal to ensure the value of the house they are taking as collateral is equal or more than the amount they are providing as a loan. The evaluation helps lenders to avoid losing money if they decide to sell off the property due to failure by the borrower to pay up at the specified time, also known as foreclosure. A certified professional handles a home appraisal and usually has years of training and experience. After the assessment, the expert is expected to give an unbiased opinion about the value of your property. Some things would present your house in a better light and impact on how valuable your property is.

Fix All Damaged Safety Equipment

Ensure all safety equipment that is not working is fixed before the day of appraisal, as lack of these would make you lose points during the inspection. Ensure safety equipment like smoke alarms, security alarms, water heater straps among others are present and functional in your property.

Document Your Renovations

Inform your home appraiser of recent renovations you may have done on the property, the time when you did them and the cost of such repairs. The appraiser might not notice all the changes since it’s not their house, which is why you should bring it to their notice.

A Little Touch Up

Houses with cracked walls, a leaking roof, water-stained walls, signs of pest infestation, damaged floors, or moldy smell will get valued at a lesser amount. Repaint your walls, replace your leaking roof, fix any broken kitchen cabinet, change the doorknobs and generally improve on the appearance of your property. Also, take a walk around and assess the visual appeal yourself to know the things that need fixing ahead of time.

The $500 Rule

Appraisers value property in $500 increments. To be assessed at a higher amount, it’s better to have things like broken doors, damaged floors, old wallpaper, leaky faucets, broken windows repaired immediately. By doing this, you will recover the amount you spent on such repairs in your home appraisal report.

Check Your Yard

You want to take a walk outside your property and do a thorough scan of what might devalue your property, and have it fixed before the home appraiser arrives. Keep your grass and shrubs neat, add some colorful flowers, remove dried leaves littering the yard and whatever clutter will make your yard less attractive. Houses with a welcoming curb appeal receive better appraisals and are considered more valuable in the market.

Your seller’s agent can help you prepare for your appraisal so heed their advice.

What Is An Escrow Account?

You may have heard the term “escrow” in your experience with real estate. You might know it’s an account, but what exactly does it do for you as a buyer? An escrow account is what your lender uses to make payments on things like property taxes, insurance, and more. The lender collects your monthly mortgage payment, and part of that cash goes into an escrow account. 

This type of account is an excellent option for homeowners because your bills relating to being a homeowner will all be paid without you having to do anything. It makes budgeting a breeze because there aren’t any complicated calculations involved. Every month, your lender collects 1/12 of the estimated tax bill and insurance cost for the home. The rest of your mortgage payment covers the principal and interest on the loan of the house.

Are Escrow Accounts Mandatory?

You’ll find that most lenders require you to have an escrow account. The purpose of the account is to keep the home safe as collateral for the loan. The bank has an interest in the proper insurance behind the property. The taxes also need to be paid on time in order to keep the property in good standing. If the taxes aren’t paid, a tax lien will be placed against the house. 

Everything In One Place


You’ll receive an annual statement from your lender that will show you how much money was collected and placed in your escrow account. Escrow payments often change because insurance premiums and taxes tend to change quite frequently. The amount being put into escrow may change a few times throughout the year. The lender keeps track of all this for you, saving you some time. 

Bills That Need To Be Paid

Whether you have an escrow account or not the bills that are included must be paid one way or another. It’s a good idea to speak with your lender before you buy a home to find out that bank’s procedures around these insurance and tax payments. Property tax and home insurance are items that you’ll need to budget for regardless of how your lender does things. An escrow account can be much more convenient for many buyers. 

Escrow is just another one of the many essential terms that you’ll come across as a homebuyer. Knowing the advantages and purpose of the account helps you to be informed as you dive into the home buying process.