Loans above the maximum loan amount established by Fannie Mae and Freddie Mac are known as 'jumbo' loans. Because jumbo loans are bought and sold on a much smaller scale, they often have a little higher interest rate than conforming, but the spread between the two varies with the economy

Some types of ARMs (for example, option ARM loans) offer payment caps rather than interest rate caps, which limit the amount the monthly payment can increase. If a loan has payment cap but has no periodic interest rate cap, then the loan may become negatively amortized: if the interest rates rise to the point that the monthly mortgage payment does not cover the interest due, any unpaid interest will get added to the loan balance, so the loan balance increases. However, you always have the option to pay the minimum monthly payment, or the fully amortized amount due.

One of the most creative products that doesn't require a set payment each month is the option ARM. After the first payment, you get four payment options to choose from each month: your lender sends you a monthly statement offering a minimum payment (1), interest-only payment (2), 30-year amortized payment (3) or 15-year amortized payment (4).

A temporary buydown is the type of loan with an initially discounted interest rate which gradually increases to an agreed-upon fixed rate usually within one to three years. An initially discounted rate allows you to qualify for more house with the same income and gives you the advantage of lower initial monthly payments for the first years of the loan when extra money may be needed for furnishings or home improvements. To reduce your monthly payments during the first few years of a mortgage you make an initial lump sum payment to the lender. If you do not have the cash to pay for the buydown, the lender can pay this fee if you agree on a little higher interest rate.

Conventional loans are loans that are not insured or guaranteed by a government agency (see FHA and VA for information on government loans). They can be conforming or non-conforming loans. Most of the conventional loans that have been made in the last several years have three basic attributes in common: 1) They have been for long terms, 2) They have been loans with fixed interest rates, and 3) they have been fully amortized (see Fixed Rate Loans and Adjustable Rate Loans.

Non-conforming loans are loans that do not conform to the guidelines set forth by Fannie Mae or Freddie Mac. Non-conforming loans consist of Jumbo loans (exceeding the conforming loan limit), inadequate credit history or derogatory credit, not enough income, home equity or home improvement loans, credit lines, and second mortgages to name a few.

Portfolio loans are loans that banks or other lending institutions may keep "in-house", or sell to the secondary market (FNMA or FHLMC). The qualifying guidelines for these types of loans may be more flexible than the requirements set forth by secondary market investors.

This is the plain-vanilla loan that most people think of when considering a mortgage. You will owe a certain percentage of the loan as interest to the lender. This amount never changes, and your monthly payment will remain the same over the life of your loan. Loans for homes are usually for 15 or 30 years.

One of the simplest ways to own your home sooner is to pay the lowest rate possible and as few bank fees as possible. If you don't need the ‘bells and whistles' that come with many loans (at a price), then a basic home loan could be the answer.

Fixed rate home loans offer a fixed interest rate for a set period of time. Because of this, repayments remain the same for the duration of the fixed rate period, usually between one and five years. At the end of the fixed period, you can switch to a variable rate loan or negotiate a new fixed rate or even opt for a split rate loan.