FHA Loans

• Federal Housing Administration (FHA) loans are similar to traditional loans but with a couple key differences. The FHA subsidizes mortgages for primary residences, making it much less risky for lenders to offer them. In return, the down payment rates for FHA loans are as low as 3.5 percent. In return, the borrower must agree to pay government mortgage insurance premiums on the loan.
  
  

Hybrid Mortgages

• A hybrid mortgage combines some features of the fixed-rate and variable-rate mortgage. Usually, the hybrid loan will start off as a fixed-rate mortgage and have an unchanging low interest rate for several years. Then, it will switch to a variable status and the rate usually will start to increase. Many borrowers choose this loan with the intent of refinancing before the variable period begins.
  
  

Interest-Only Mortgages

• In an interest-only mortgage, the borrower only has to pay the interest on the loan for a specific period of time, usually several years. After that, the principal is due either as a lump sum or as a series of payments. This creates several years of very low payments, but at the cost of extra interest due by the end of the loan.
  
  

Reverse Mortgages

• Reverse mortgages are designed for older homeowners that do not have large incomes or enough credit to take out a second mortgage. The reverse mortgage pays out the mortgage amount as either a monthly payment or a lump sum, but does not require any repayment until the house is sold. The amount is based on the equity available in the home. This makes it easy to use the mortgage funds without worry about the debt.
  
  

Private Financing

• Private financing covers all mortgages that are made by lenders that are not primary financial institutions. For instance, homeowners may agree to a lease-to-own contract with a buyer. An unrelated lender may also agree to create the mortgage for the buyer, but these private lenders will often require a very high interest rate compared to traditional mortgages.