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Mortgage loans are also classified as:

Conforming loan:
  • A mortgage loan that meets all of the eligibility requirements set by federal agencies such as Fannie Mae and Freddie Mac.
  • The maximum conforming loan amount changes from time to time and varies according to geographical location.


Jumbo loan:
  • A loan for an amount of money larger than the conforming loan limits set by government-backed agencies Fannie Mae and Freddie Mac.
  • Loan limits in high-cost areas vary by location.
What works for you

 

Advantages

Disadvantages

Fixed rate mortgage

  • Interest rate doesn’t increase during the life of the loan.
  • The total monthly payments of principal and interest don’t change.
  • May be a good choice for a buyer who plans to own the home for a long time.
  • The interest rate is often higher than the initial rate for adjustable rate mortgage.
  • May not be suitable for a buyer planning to sell or refinance within five to seven years.

Adjustable
rate mortgage

  • The initial interest rate is often lower than the rate for a fixed-rate mortgage.
  • After the initial fixed rate period, monthly payments could decrease if interest rates go down.
  • May be a good choice for a buyer who plans to sell or refinance within five to seven years.
  • After the initial fixed rate period, monthly payments could increase if interest rates go up.
  • May not be ideal for a buyer on a fixed income.
  • May not be optimal for a buyer who plans to keep the property for longer than the initial fixed rate period.
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