Different Types Of Mortgage Loan Agreements, Downloadable Templates & When To Use

Below is a table outlining various types of mortgage loan agreements and their typical uses. Keep in mind that specific terms and conditions can vary depending on the lender, the borrower’s creditworthiness, and the country’s financial regulations.

Type of Mortgage Loan AgreementDescriptionTypical Use
Fixed-Rate MortgageInterest rate remains constant throughout the termHome purchases where borrower wants stable payments
Adjustable-Rate Mortgage (ARM)Interest rate can change at specified timesShort-term home ownership, or expectation of future falling rates
Interest-Only MortgageOnly interest payments are required initiallyShort-term flexibility in payments, often for investment properties
Balloon MortgageLow initial payments, large lump-sum at endShort-term financing with the intention of selling or refinancing
FHA LoanGovernment-backed, lower down paymentFirst-time homebuyers, those with lower credit scores
VA LoanBacked by the Dept. of Veterans AffairsU.S. Veterans, active duty, or certain family members
Jumbo LoanExceeds federal loan limitsHigh-cost home purchases
Reverse MortgageConverts home equity into cash or line of creditSeniors who own their home outright or have significant equity
Construction LoanShort-term loan for home constructionBuilding a new home
Bridge LoanShort-term loan until long-term financing is securedBuying a new home before selling the old one
Home Equity LoanUses equity in home as collateralHome improvements, debt consolidation
Home Equity Line of Credit (HELOC)Revolving line of credit based on home equityOngoing expenses like education or renovations
Conventional LoanNot government-insuredBorrowers with good credit, stable income, and a down payment
Subprime MortgageHigher interest rates for those with poor creditBorrowers with poor credit history
USDA LoanRural development loan backed by the U.S. governmentRural property purchases, often with no down payment required

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