|
California
Department
of Real Estate License
#01198426
Department of Real Estate
"License Information"
(916) 227-0931
|
|
Understanding
Loan Types
|
| |
|
What
type of
loan program
is best for you?
|
|
|
The subjects below
explain the main loan categories that the many loan programs fall under.
These are major types of loans, not to be confused with the individual
loan programs themselves (such as Fixed Rate Loans
or Adjustable Rate Mortgages).
Click
on a loan type below:
- Conventional
Loans
- Conforming
Loans
- Non-Conforming
Loans
- Government
Loans
- In-House
or Portfolio Loans
- Commercial
Loans
- CONVENTIONAL
LOANS:
Conventional
loans are loans that are not insured or guaranteed by a government
agency (see FHA and VA for information on government loans).
They can be conforming or non-conforming loans.
Most of the conventional loans that have been made in the last several
years have three basic attributes in common: 1) They have been for
long terms, 2) They have been loans with fixed interest rates, and
3) they have been fully amortized (see Fixed Rate
Loans and Adjustable Rate Loans.
Top
- CONFORMING
LOANS:
Conforming loans
can be resold in the secondary market due to the fact that they meet
nationally accepted underwriting criteria established by national
secondary market investors, primarily Fannie Mae (FNMA) and Freddie
Mac (FHLMC). This criteria includes down payment amounts, maximum
loan amounts, property specifications, borrower income requirements
and credit guidelines. Due to the importance of being able to
liquidate real estate investments (loans) in the event of a financial
problem, the trend for lenders is to obtain loans that meet secondary
market standards.
Top
NON-CONFORMING
LOANS:
Non-conforming
loans are loans that do not conform to the guidelines set forth by
Fannie Mae or Freddie Mac. Non-conforming loans consist of Jumbo
loans (exceeding the conforming loan limit), inadequate credit history
or derogatory credit, not enough income, home equity or home improvement
loans, credit lines, and second mortgages to name a few.
Top
-
- GOVERNMENT
LOANS:
Government loans
consist of loans that are in some way guaranteed or purchased by government
owned corporations or organizations. For instance, GNMA (Government
National Mortgage Association) assists in the financing of urban renewal
and housing projects by providing below-market rates to low income
families. GNMA guarantees the payment of principal and interest
on FHA and VA mortgages through its mortgage-backed securities program.
It operates under the Department of Housing and Urban Development
(HUD).
Top
-
- IN-HOUSE
or PORTFOLIO LOANS:
Portfolio loans
are loans that banks or other lending institutions may keep "in-house",
or sell to the secondary market (FNMA or FHLMC). The qualifying
guidelines for these types of loans may be more flexible than the
requirements set forth by secondary market investors.
Top
-
- COMMERCIAL
LOANS:
Commercial loans
are generally made by commercial banks who normally supply capital
for business ventures and construction activities on a comparatively
short-term basis. Although in recent years, large commercial
banks have increased their participation in home mortgage lending.
They usually make loans on residential properties with five or more
units (apartment complexes), warehouses, office buildings, etc.
Top
Return
to the Mortgage Answers page
-
|
|
