There are numerous types of real
estate loans. Some of the more
common types are listed below. There
are many more. If you are in
an unusual financial situation and are uncertain if you are in a position
to buy a home, you may want to shop around for a lender that has a loan
program available to help you. Many
real estate agents will also be aware of loan programs that can help
buyers in different situations, and may know which lender is best suited
to your needs. Because many types of loans are similar,
a borrower should consult with a loan officer to fully understand the
advantages and disadvantages of each loan.
To view the three main categories of loans, click
A loan where the payment addresses the interest owed, plus
something towards the principal (the money you borrowed). If the loan is Fully Amortized, the borrower
will pay enough towards the principal with every payment, so that the
loan will be fully paid off by the end of the loan term.
A loan that is only partially amortized, meaning the borrower
is paying something towards the principal, but not enough to pay off
the loan by the end of the loan term.
This will allow the borrower to make lower payments throughout
the life of the loan, but will require one large payment at the end. The homebuyer should be prepared to either
make the large payment, or refinance with a normal amortized loan at
some point before the end of the original loan term, either when their
financial situation or interest rates have improved.
A loan in which the buyer pays additional money up front
(or the seller pays on behalf of the buyer), which buys down the interest
rate in the beginning part of a loan.
The most common is a 2/1 Buydown.
This would lower the interest rate 2% for the first year, 1%
the second year, and then the buyer would pay the normal interest rate
for the remainder of the loan term.
This can be a possible option for someone who knows that their
income will be increasing over the next few years.
Other options would include an adjustable-rate mortgage (ARM)
or a graduated-payment mortgage (GPM).
Are You Qualified To Buy?
All About FHA Loans
The Loan Process
Veterans & Military