Types of mortgage loans

There are basically 3 major types of mortgage loans which we will look into in the following sections.

1. Conforming Loans

These loans adhere to the requirements fixed by the 2 GSEs which buy & sell mortgage loans from lenders, Freddie Mac & Fannie Mae. The GSEs have set caps on the mortgages that they buy for various types of mortgage loans such as single-family home loans and other type of home loans.

2. Non-conforming Loans

Non-conforming loans are also called as Jumbo Loans. These mortgages are for loans that exceed the conforming loan limits and normally have slightly higher rate of interest.

3. Bad Credit Loans

In mortgage sector, borkers refer to a loan applicant's "paper". Here paper means a borrower who has less than perfect credit. "B" papers means a borrower with relatively minor problems and "D" means the applicant has serious problems like bankruptcy filings. The lower your paper, the more you should expect to pay in terms of interest, down payment & points.