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FINANCE 101continued
TYPES of MORTGAGEScontinued
Balloon mortgage loans. These loans usually have interest only payments. In this case, you do not pay loan principal each month and the entire loan amount is due at the end of the loan. This type loan allows you to minimize your monthly payments until you pay the loan off because of selling the home or by refinancing the loan.
Construction to permanent loans. Interim construction financing the borrower obtains to fund building a new home. Upon completion it is replaced with a long term mortgage.
Piggy Back loans. A loan in which the buyer makes a first mortgage to finance part of the value of the property and a second mortgage to finance another part of the value. A buyer puts 10% down, then makes a first mortgage for 80% of the home's value and second mortgage for the remaining 10% of its value. The two mortgages together are called a piggyback loan.
Goverment loans. Loans that the federal government insures or guarantees. The main ones are a government agency such as the FHA (Federal Housing Administration), the VA (Veterans Administration), or the Rural Development Services (formerly know as Farmers Home Administration).
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