Term (length of loan- 10, 15, 20, 30 or 40 years)

Loan Amount

Type of Lender (A paper, Subprime, Government) details below

Loan to Value (what percentage of the appraised value are you borrowing) details below

Type of Loan (Fixed rate, Adjustable Rate, Interest Only, Balloon, Reverse Mortgage)  details below

Interest Rate (The categories above will dictate what interest rates are offered)

Types of Lenders/Loan Categories

The major loan categories are conventional and government. Conventional loans can be further categorized into conforming and non-conforming. Government loans primarily refer to FHA and VA loans.

Conforming Loans (A paper)
A conforming loan adheres to the guidelines established by Fannie Mae or Freddie Mac. These guidelines establish maximum loan amounts, down payment, credit and income requirements and acceptable property types. Lenders that make loans according to these guidelines may sell them to Fannie Mae or Freddie Mac. Conforming loans make up the majority of loans in the U.S. loan market.

Non-conforming Loans (Subprime)
Loans that do not conform to the guidelines established by Fannie Mae or Freddie Mac are called non-conforming loans. A loan that is larger than the conforming loan limit is called a Jumbo loan. Loans that do not meet the credit quality of conforming loans ('A' paper) are referred to ad A- through 'D' paper loans, or subprime loans.

Government Backed Loans
FHA and VA loans are the two most popular types of Government backed loans. Government backed loans typically have different loan limits and qualifying criteria compared to conventional loans.

Loan to Value (LTV)

If you need a loan that is above an 80% LTV (meaning you are putting down less than 20% downpayment)  AND you are going with an A Lender you will want to avoid Private Mortgage Insurance (PMI). This is an insurance policy that you pay the bank for their benefit that results in payment to the bank if the home must be foreclosed on. Currently, your PMI payment is not tax deductible.

The easiest way to avoid PMI is to make a cash down payment of 20% or more. Potential sources of additional cash include:

• Borrowing against your 401(k) retirement plan
• Asking relatives for a gift
• Refinancing your car and taking cash out
• Selling assets.

Types of Loan Programs

Adjustable Rate Mortgage (ARM)

A loan with an interest rate that is periodically adjusted to reflect changes in a specified financial index. For example, with a 3/1 ARM the rate is fixed for a period of 3 years after which in the 4th year the loan becomes an adjustable rate. The adjustable rate is tied to the 1-year treasury index and is added to a pre-determined margin (usually between 2.25-4.0%) to arrive at your new monthly rate. Your rate will then adjust once a year within your margin and remain within your life caps. The loan is fully amortized (or paid off) in 30 years if the normal payment schedule is followed. Most common are 2/1, 3/1, 3/27, 5/1 and 7/1 ARMs.

Balloon

Also called a 30/15 (30 due in 15)- the rate is fixed for a 15 years and the payment is amortized over 30 years to provide for a lower monthly payment. This loan is due and payable as a balloon loan at the end of 15 years .

Fixed Rate

The interest rate is fixed for a set number of years (term) and the loan is fully amortized (or paid off) in the term number of years if the normal payment schedule is followed. Most common are 40, 30, 20, and 15 year terms.

Interest Only

An Interest-Only loan is a home loan program where you have an option to make "interest-only" payments for a defined period of the note. The term "interest-only" does not mean not mean a consumer will never have to repay the principal amount of the loan. These mortgage programs simply have what's known as an interest-only payment option attached to the note. To understand interest-only loans better please read the following explanation of the payments on a typical 5/1 interest-only adjustable rate mortgage product.

5/1 Interest Only Loan:

During the first 5 years your only obligation will be interest-only payments which are usually based on a fixed interest rate for these initial years. At the beginning of the 6th year (month 61) the unpaid balance is fully amortized over the remaining term and the borrower is now obligated to make principal and interest payments to the lender. Think of it as taking a 25 year mortgage on an adjustable rate note tied to the then current interest rates. Although your loan will be subject to future market rates your margin will not change throughout the remaining term of the loan. Your interest rate will adjust regularly (usually on an annual basis) according to the original terms of the mortgage note. It's important to remember that these are now principal and interest payments so your payment may be higher even if your interest rate is lower.

Reverse Mortgage

A reverse mortgage is a sophisticated financial planning tool that enables seniors to stay in their home -- or "age in place" -- and maintain or improve their standard of living without taking on a monthly mortgage payment.  A reverse mortgage is a special type of loan made to older homeowners who have at least a certain amount of equity in their home, to enable them to convert the equity in their home to cash to finance living expenses, home improvements, in-home health care, or other needs.  With a reverse mortgage, the payment stream is "reversed." That is, payments are made by the lender to the borrower, rather than monthly repayments by the borrower to the lender, as occurs with a regular home purchase mortgage.