What is a FHA Loan?
A FHA insured loan
is a Federal Housing Administration mortgage insurance
backed mortgage loan
which is provided by a FHA-approved lender. FHA insured loans are a type of federal assistance
and have historically allowed lower income Americans
to borrow money for the purchase of a home that they would not otherwise be able to afford. To obtain mortgage insurance from the Federal Housing Administration, a mortgage insurance premium
(MIP) equal to a percentage of the loan amount at closing is required, and is normally financed by the lender and paid to FHA on the borrower's behalf. Depending on the loan-to-value ratio, there may be a monthly premium as well.
What is a VA Loan?
A VA loan is a mortgage loan in the United States guaranteed by the U.S. Department of Veterans Affairs (VA). The loan may be issued by qualified lenders.
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. Eligible areas are designated by the VA as housing credit shortage areas and are generally rural areas and small cities and towns not near metropolitan or commuting areas of large cities.
What is a Conventional Loan?
A Conventional loan
is a lender agreement that's not guaranteed or insured by the federal government under the Veterans Administration (VA
) the Federal Housing Administration (FHA
), or the Rural Housing Service (RHS) of the U.S. Department of Agriculture. Although a conventional loan is not insured or guaranteed by the government, it can still follow the guidelines of government sponsored enterprises (GSE's) such as Fannie Mae or Freddie Mac as both Fannie Mae and Freddie Mac are stockholder-owned corporations and are not part of the federal government.
What is an ARM?
A variable-rate mortgage
, adjustable-rate mortgage
), or tracker mortgage
is a mortgage loan
with the interest rate
on the note
periodically adjusted based on an index which reflects the cost to the lender of borrowing on the credit markets.
The loan may be offered at the lender's standard variable rate/base rate
. There may be a direct and legally defined link to the underlying index, but where the lender offers no specific link to the underlying market of index they can choose to increase or decrease at their discretion. The term "variable-rate mortgage" is most common outside the United States
, whilst in the United States, "adjustable-rate mortgage" is most common, and implies a mortgage regulated by the Federal government,
with limitations on charges ("caps"). In many countries, adjustable rate mortgages are the norm, and in such places, may simply be referred to as mortgages.