Mortgage Help   Mortgage Rates Real Estate Credit Foreclosure Tax Mortgage Rates Mortgage Basics Chapter 1: How much house can you afford? Homeownership Should You Buy or Rent Summary   Chapter 2: Adjustable-rate mortgages ARM and a fixed-rate mortgage Fixed-rate mortgages Understanding the key elements Which type of lender is right for you? Other types of mortgages Subprime Summary   Chapter 3: Your credit score Down Payment How lenders set rates Low down payments Mortgage insurance Your mortgage payment Mortgage Points Summary   Chapter 4: The good faith estimate Inspection and Insurance Necessary paperwork for a buyer Other lender paperwork Paperwork and fees Prequalification and preapproval Special circumstances Summary   Chapter 5: Ten questions to ask Turned down for a mortgage Underwriting What lenders ask Summary   Chapter 6:  Understanding the closing process Escrow Summary   Chapter 7: When your mortgage is sold Avoiding foreclosure Paying ahead Payment changes Refinancing Removing mortgage insurance Summary Other types of mortgages There are many different types of mortgages on the market. You don't have to stick with a traditional fixed-rate mortgage or adjustable-rate mortgage; there are other types of mortgages that you can use to finance your home purchase. Other types of mortgages include: jumbo mortgages, two-step mortgages, balloon mortgages, assumable mortgages, construction mortgages and seller-financed mortgages. There are many other types and forms of mortgages out there, you simply have to do a little research. Jumbo mortgage The jumbo mortgage is a popular type of nonconforming loan. This is a loan for borrowers who want a mortgage that exceeds the loan limits set by Fannie Mae and Freddie Mac, the two corporations that buy mortgage loans from lenders. The single-family limit changes annually. If you find that you need more than the traditional mortgage amount, you will have to take out a jumbo mortgage. Jumbo mortgages come with higher interest rates than traditional conforming mortgages, such as 30-year fixed-rate or even ARMs. The jumbo gives you the opportunity to buy a larger, more expensive home. Two-step mortgages A two-step mortgage is a combination of a fixed mortgage and an adjustable-rate mortgage. They are often called a 2/28, 5/25 or 7/23. A two-step mortgage gives you a fixed rate and a payment for an initial period. Then you will have one interest rate adjustment. After the one adjustment, the rate is then fixed for the remainder of the mortgage term. For example, a 5/25 has a fixed rate for the first five years. After the five years, the rate will adjust to a new fixed rate for the remaining 25 years left on the mortgage. Two-step mortgages allow borrowers with poor credit to buy a home and improve their credit. But if they don't improve their credit, they could be stuck with a high-rate loan for more than two or three years. Balloon mortgage A balloon mortgage gives a borrower a low rate and payment for a set period of time, usually between three and 10 years. After the time expires, the borrower will have to pay the principal that remains in one lump sum. Often, the mortgage can be converted to a fixed-rate or adjustable-rate mortgage. Most borrowers either sell the home before the due date or refinance the balance into a new mortgage. Balloon mortgages offer initial savings for a borrower who doesn't plan on owning a home very long. But if the borrower remains in the home, he will either have to refinance or pay off the mortgage. Assumable mortgage An assumable mortgage is rare in today's market. A homeowner who has an assumable loan can simply give the loan to a buyer instead of using the proceeds to pay off the home's mortgage. If rates are low and you can get one, it is worth it. If rates go up, buyers will want to assume your mortgage, which has a lower rate, and may be willing to pay more for your home. Assumable mortgages save you on closing costs and can be a useful tool in selling a home. But sellers will charge more for a home with an assumable mortgage, so if you are looking to buy this type of home, you will need more cash to cover the difference between the asking price and the loan balance. Construction mortgage Construction mortgages help you build your home, instead of buy an existing home. This is usually a two-step process in which you pay higher rates during the construction and take money as needed to pay the builders. During this time, you are usually only paying the interest on the outstanding amount. After the closing, the mortgage usually converts to a traditional mortgage situation. Seller-financing When the seller finances the sale of a home, he is providing the financing to the buyer. The buyer makes monthly payments to the seller who holds the lien on the property. A promissory note is used to secure the property. This type of financing often includes an assumable mortgage feature.