A fixed-rate mortgage (FRM), the most common mortgage loan structure, is a fully amortizing mortgage loan where the interest rate on the note remains the same through the term of the loan, as opposed to loans where the interest rate may adjust or “float”. As a result, the principal and interest payment amounts and the duration of the loan are fixed.

In the United States, a jumbo mortgage is a mortgage loan in an amount above conventional conforming loan limits. This standard is set by the two government-sponsored enterprises Fannie Mae and Freddie Mac, and sets the limit on the maximum value of any individual mortgage they will purchase from a lender. Fannie Mae (FNMA) and Freddie Mac (FHLMC) are large agencies that purchase the bulk of U.S. residential mortgages from banks and other lenders, allowing them to free up liquidity to lend more mortgages. In Texas, this loan limit is currently any loan over $647,200.00. Jumbo loans generally have a higher bar for qualification and larger down payments.

A variable-rate mortgage or adjustable-rate mortgage (ARM) is a mortgage loan where the interest rate can change after a set period of time. There is a fixed period or duration on the loan, and then it will adjust annually or every six months after this fixed period. Common fixed periods are 5, 7, and 10 years. Because these loans carry more risk, they often have lower initial fixed periods than the 30-year fixed loans. There are also limits on how high the rate can adjust based on predetermined caps, margin, and an index.

A home equity loan (sometimes abbreviated HELOC) is a type of loan in which the borrower uses the equity in their home as collateral. These loans are useful to finance major expenses such as home repairs, medical bills or college education. A home equity loan creates a lien against the borrower’s house, and reduces actual home equity. In Texas, these loans are limited to 80% of the value of the home. There are fixed versions and floating interest-only versions of these loans.

This is a loan designed to help with improvement to your home, typically for updating, remodeling, putting in a pool, and landscaping, These loans are typically 10, 15, or 20-year terms and are generally in the second line position behind your first lien. They are also typically capped to 90% of the improved value of the home. You also typically have to have an improvement budget and contractor of record to that will be doing the work. In Texas, this is not classified as a home equity loan but rather a home improvement loan.

In the broadest sense of the term, a Construction Loan is any loan where the proceeds are used to finance construction of some kind. These loans are typically done for larger-scale projects and or remodels. These loans are done in a one-time close variety or two-time close most commonly. They are also interest only during the term of construction and then are refinanced into your permanent loan post completion of the project.

An FHA-insured loan is a mortgage loan that is guaranteed by the Federal Government. Federal Housing Administration backs these loans and they are typically designed for first-time borrowers and have low down payment requirements. These loans are more lenient on the three major qualification criteria like credit scores, down payment, and debt ratios. These days these loans are mainly used for those with lower credit scores. The interest rates on these loans are often lower than the conventional loans but have more restrictions and costs.

The VA loan was designed to offer long-term financing to eligible American veterans or their surviving spouses (provided they do not remarry). The basic intention of the VA direct home loan program is to supply home financing to eligible veterans in areas where private financing is not generally available and to help veterans purchase properties with no down payment. The main features of VA loans are zero down payment and no monthly mortgage insurance.

A second mortgage typically refers to a secured loan (or mortgage) that is subordinate to another loan against the same property. In real estate, a property can have multiple loans or liens against it. These loans are often used to bridge the gap between jumbo loans and conforming loans for clients wanting to put less than 20% down. It is also sometimes used to avoid monthly mortgage insurance. They are typically done in a 10, 15, or 20-year term. The interest rate is higher on these loans due to them being in a subordinate lien position and smaller in size or loan amount.