Types of Mortgages

Here’s a brief overview of some of the most common mortgage options. More specific information is available on our Mortgage Programs at Virginia Credit Union web page.

Mortgage Descriptions

Fixed rate mortgage - The interest rate and principal payment remain unchanged throughout the length of the loan.

Adjustable rate mortgage (ARM) - A loan with a payment that may adjust up and down based on interest rate changes. ARMs are attractive because initially they may offer lower interest rates than fixed-rate mortgages.

When you see an ARM described as a 3/1 ARM or 6/2 ARM, the first number is the number of years that the interest rate is locked in. The second number is the number of years between possible rate adjustments.

Conventional mortgage - A mortgage not insured by a government agency. They fall into three categories:

Conforming loans meet the approval guidelines of Fannie Mae and Freddie Mac. The limits for these loans are reviewed annually and, if needed, changed to reflect changes in the national average price for single-family homes.

Jumbo loans are loans too large to meet the eligibility requirements of Fannie Mae or Freddie Mac. It typically follows conforming loan guidelines and has a higher interest rate.

Non-conforming loans do not meet the general guidelines of Fannie Mae or Freddie Mac. They allow for people who do not fit the conforming guideline model to be able to become homeowners

Government loans - A mortgage insured by a government agency, such as:

FHA (Federal Housing Authority) - FHA mortgages usually require a lower down payment and may sometimes have a lower interest rate.

VA (Veteran's Administration) - VA Loans are made only to individuals who have served in one of the U.S. Armed Forces.

VHDA - A loan insured by the Virginia Housing Development Authority. VHDA loans are for consumers who have low-to-moderate incomes.

Interest only mortgage - A mortgage that does not require payment toward the principal for a specified period, usually 5 to 10 years, leaving the loan balance unchanged. After that period, both interest and principal are included in the monthly payment.

Reverse mortgage - This mortgage, designed for people who are 62 years of age or older, lets you tap into your home’s equity without having to repay the debt for as long as you live there. Instead of making monthly payments, you receive monthly payments. (This type of mortgage is not offered at this time by VACU.)

If you have questions about any of these types of mortgage loans or if we can help you in any way, please contact us .

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