Here's a quick overview of some specialty mortgage loan types which may be of benefit to you at some point in your real estate career.
Five Specialty Mortgage Loans
- Piggyback Mortgage Loans. These loans are sometimes called combo loans. They're a way for home buyers to save a little money by avoiding private mortgage insurance (PMI) fees. PMI is required by mortgage companies when home buyers put less than 20% down on their home. By getting two smaller traditional loans, buyers have a first and second mortgage, and get out of paying for PMI.
- Streamlined K-Mortgage Loans. This is a loan offered by the Federal Housing Administration (FHA). It's available to qualifying home owners who need to update or remodel their home. While the HUD's 203K program helps people qualify to buy fixer-uppers and renovate them, the Streamlined K-Mortgage Loans assist current homeowners in obtaining loans to rehabilitate their home. There are "price restrictions" so to speak on how much money can be spent on particular repairs and updates but the loans are an affordable way for middle- to low-income earners to make valuable improvements and all of the funds are included in one loan.
- Bridge Loans. Are you relocating, or wanting to purchase a new home but you haven't sold your old home yet? You may be the perfect candidate for a Bridge Loan, also called a Swing Loan. These loans are created to act as financial "bridges", allowing home buyers to continue making the mortgage on their old home while beginning to pay the mortgage on their new home. They can also be used to finance a down payment for the new home. In most cases, the loan terms are between two weeks and three years. The equity from your old home is used as collateral for the loan. Once your old home is sold, the bridge loan is repaid.
- Equity Mortgage Loans. If your house has accrued equity, you can usually qualify for a loan in order to gain access to a certain percentage of those funds. Your house becomes the lender's collateral and you get a check and begin paying the loan back. In many cases, these loans are an affordable way to remodel your home, put children through college, etc.
- Reverse Mortgage Loans. These are available to home owners 62-years and older who have significant equity in a home. There are fees involved, of course, but ultimately the lender pays the borrower money every month or in a lump sum. The borrower maintains the title to the house. The loan is repaid when the house is sold.