Many types of mortgage loans remain available to borrowers even though mortgage markets have tightened dramatically over the last few years. Mortgage types are generally divided into two different categories, FHA or VA loans.

FHA Mortgages:

The FHA is a division of HUD that provides insurance policies to guarantee 100% of the payment of a loan in the event of default. FHA insurance protects the lender. FHA mortgage loans provide several advantages not available through conventional loans.

Low Down payment: FHA minimum down payment is 3.5% of the purchase price. For a $200,000 home minimum down payment is $7,000.

No minimum credit score requirement: FHA guidelines do not have a minimum credit score requirement.

203k Loans: FHA has a home improvement loan where a borrower can take a 30 year fixed mortgage to improve their current residence or renovate a home to purchase. The down payment can be 3.5% of the acquisition cost plus renovations.

VA Mortgages:

VA mortgages are loans available to veterans of the U. S. armed forces. The VA allows 100% financing up to the maximum loan limit. Loans above the maximum loan limit are available, but not to 100% of the purchase price. Borrowers must be veterans of the U. S. armed forces with an honorable discharge or currently in the armed forces. Co-borrowers must be the spouse of the veteran or a veteran as well. This type of mortgage loan is available for owner occupied 1 to 4 family homes only.

Any loan that is not an FHA or VA loan is considered a conventional loan. With in conventional loans, several types exist.

Conforming loans are mortgage loans within Fannie Mae and Freddie Mac loan limits. These loan amounts are set by Congress every year based on median home prices. Some geographic areas receive high price designations with higher loan limits. The loan limits are designated by county and can be accessed through Fannie Mae's website. Types of conforming loans include:

Adjustable rate mortgages or ARMs have a fixed initial period, usually 3, 5, 7 or 10 years. After the initial fixed period, the loan adjusts every year based on the 1 year LIBOR or T-Bill.

Fixed Rate Mortgages have a fixed interest rate for the life of the loan with terms of 10, 15, 20, 25 or 30 years. Rates for fixed rate mortgages are generally higher than the initial term of an ARM because the lender takes the interest rate risk instead of the borrower.

Jumbo Loans are another type of conventional loan, similar to conforming loan programs but with loan amounts above conforming loan limits.

Construction Loans:

Construction loans exist for the renovation of a primary residence or for the ground up construction of a primary residence. The loans are for the term of the residence and the must be re-cast or refinanced into a permanent loan.

Government Loans:

Government loans are mortgage loans guaranteed by the U. S. government through an insurance policy paid by the borrower. The government agencies provide two basic loan types for the purchase of 1 to 4 family primary residences.