Adjustable Rate Mortgages (ARM)
Adjustable Rate Mortgages (ARM)'s are loans whose interest rate can vary during the loan's term. These loans usually have a fixed interest rate for an initial period of time (3, 5, 7 or 10 years) and then adjust based on a fixed formula, as outlined in your loan documents.  Typically the formula is based on an "Index" and a "Margin".  The Index could be a US Treasury Bill, or a Libor (there are others as well) and the margin is a fixed % to make the adjustment by.  ALSO to know, the shorter the term your rate is locked in, the lower your starting rate will be. In general; the lower the rate risk to the lender (3 yr vs. 7 yr) the lower the rate will be. Hence; the 30 year fixed rate is the highest.

So let's say it's time to determine the adjustment and your Index is based on the 1year Libor rate, and that rate is .76.  Your Margin will always stay constant, and let's say that is 2.25%.  You simply add the two together, and that will become your adjusted new rate (3.01). 

There will also be "Caps" that will determine how high (or low) your adjustments can be for the term of your loan. 

Of course while those Index rates are extra low, you'll love your ARM.  You just have to understand they don't always stay as low as they are right now.  If you are not a gambler, you may not feel comfortable with this uncertainty.

FHA Loans

FHA home loans are mortgage loans that are insured against default by the Federal Housing Administration (FHA).  These loans tend to be a little more lenient about credit. Another possible advantage is a FHA loan allows a co-signer as well as a "Gift" for the down payment.

The VA Loan provides veterans with a federally guaranteed home loan which requires no down payment. This program was designed to provide housing and assistance for veterans and their families, and the dream of home ownership became a reality for millions of veterans. These loans do not carry any monthly mortgage insurance, and the "Funding Fee" is determined by several factors surrounding the Veteran's eligibility and circumstance.

A mortgage is called "interest only" when its monthly payment does not include the repayment of principal for a certain period of time. The homeowner is always allowed to pay additional principle reduction payments, it's an option during the interest only period.

Balloon mortgages have a fixed rate and payments are based on a 30 year amortization, but they have a "balloon" feature when the balance is due in full.  Typically the balloon will be in either 3, 5 or 7 years.  These loans MAY have a feature in them that will allow the homeowner to adjust their rate based on current conditions for the remaining term.

Other programs come and go.  These reflect the basic options available today.