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There are many different mortgage types from Adjustable Rate Mortgages (ARMs) to VA Mortgages.

Below are 14 different mortgage types.

Adjustable Rate Mortgage (also called at ARM or variable rate mortgage)

An adjustable rate mortgage (ARM) is a mortgage loan where the interest rate on the note is periodically adjusted based on a variety of indices. The purpose of the interest rate adjustment is primarily to bring the interest rate on the mortgage in line with market rates. The mortgage holder is protected by a maximum interest rate (called a ceiling), which might be reset annually. ARMs usually start with better rates than fixed rate mortgages, in order to compensate the borrower for the additional risk that future interest rate fluctuations will create. The index for your particular loan is established at the time of application.

Assumable Mortgage

The assumable mortgage is an alternative to this traditional technique. With an assumable mortgage, the home buyer has the ability to take over the existing mortgage of the seller as long as the lender of that mortgage approves.

Balloon Mortgages

Balloon loans are short-term fixed rate loans that have fixed monthly payments based usually upon a 30-year fully amortizing schedule and a lump sum payment at the end of its term. Usually they have terms of 3, 5, and 7 years. The advantage of this type of loan is that the interest rate on balloon loans is generally lower than 30- and 15- year fixed rate mortgages resulting in lower monthly payments. The disadvantage is that at the end of the term you will have to come up with a lump sum to pay off your lender, either through a refinance or from your own savings.

Buydown Mortgage

A temporary buydown is the type of loan with an initially discounted interest rate which gradually increases to an agreed-upon fixed rate usually within one to three years. An initially discounted rate allows you to qualify for more house with the same income and gives you the advantage of lower initial monthly payments for the first years of the loan when extra money may be needed for furnishings or home improvements. To reduce your monthly payments during the first few years of a mortgage you make an initial lump sum payment to the lender (a buydown).

FHA Mortgages

A FHA loan is a federal assistance mortgage loan insured by the Federal Housing Administration (FHA), which is part of the U.S. Dept. of Housing and Urban Development (HUD). The biggest benefits of a FHA loan are; 1) lower down payment requirements and 2) are easier to qualify than conventional loans.

Fixed Rate Mortgages

With fixed rate mortgage (FRM) loan the interest rate and your mortgage monthly payments remain fixed for the period of the loan. Fixed-rate mortgages are available for 40, 30, 25, 20, 15 years and 10 years. Generally, the shorter the term of a loan, the lower the interest rate you could get. The most popular mortgage terms are 30 and 15 years.

Graduated Payment Mortgages (GPMs)

Graduated payment mortgages have payments that start low and gradually increase at predetermined times. The lower initial payments allow borrowers to qualify for a larger loan amount. The monthly payments will eventually become higher in order to catch up from the lower payments. In fact, your loan will be negatively amortizing during the early years of the loan, then pay off the principal at an accelerated pace through the later years.

Lenders offer different GPM payment plans, which vary in the rate of payment increases and the number of years over which the payments will increase. The greater the rate of increase or the longer the period of increase, the lower the mortgage payments in the early years.

High End Mortgage (Super Jumbo)

Loans above the maximum loan amount established by Fannie Mae and Freddie Mac are known as 'jumbo' loans. Jumbo mortgages are bigger than what the government will buy or guarantee (between $417,000 and $729,750, depending on the location). Jumbos cost more because these loans are bought and sold on a much smaller scale. They often have a little higher interest rate than conforming, but the spread between the two varies with the economy.

Interest Only Mortgage

An interest-only loan is a loan in which, for a set term, the borrower pays only the interest on the principal balance, with the principal balance unchanged. At the end of the interest-only term the borrower may enter an interest-only mortgage, pay the principal, or (with some lenders) convert the loan to a principal and interest payment loan at his/her option.

Option Arm (Negative Amortization) Mortgage

One of the most creative loan products that doesn't require a set payment each month is the option ARM. With this loan, you get four payment options to choose from each month: your lender sends you a monthly statement offering a (1) minimum payment (usually based on an interest rate around 1%), (2) interest-only payment, (3) 30-year amortized payment or (4) 15-year amortized payment. It is also called negative amortization because of the option of only paying the minimum payment.

Reverse Mortgages

A reverse mortgage is a low-interest loan for senior home owners, it uses a home’s equity as collateral. The loan amount is a percentage of the home’s value determined by the age of the youngest homeowner. The loan does not have to be repaid until the last surviving homeowner permanently moves out of the property or passes away. At that time, the estate has approximately 12 months to repay the balance of the reverse mortgage or sell the home to pay off the balance. All remaining equity is inherited by the estate. The estate is not liable if the home sells for less than the balance of the reverse mortgage.

RHS Mortgage

The Rural Housing Service (RHS) of the U.S. Dept. of Agriculture guarantees loans for rural residents with minimal closing costs and no down payment.

Sub Prime Mortgage

Loans that do not meet the borrower credit requirements of Fannie Mae and Freddie Mac are called “B”, “C” and “D” paper loans (sub prime) vs. traditional “A” paper conforming loans. B/C loans are offered to borrowers that may have recently filed for bankruptcy, foreclosure, or have had late payments on their credit reports. Their purpose is to offer temporary financing to these applicants until they can qualify for conforming "A" financing.

VA Mortgages

VA loans are guaranteed by U.S. Dept. of Veterans Affairs. The guaranty allows veterans and service persons to obtain home loans with favorable loan terms, usually without a down payment. In addition, it is easier to qualify for a VA loan than a conventional loan. The U.S. Department of Veterans Affairs does not make loans, it guarantees loans made by lenders. VA determines your eligibility and, if you are qualified, VA will issue you a certificate of eligibility to be used in applying for a VA loan. Loans are obtained by making an application to a private lending institution.

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