Real estate loan types

A conventional mortgage is not insured or guaranteed by FHA, VA, or USDA. It may be conforming, meaning eligible for purchase under Fannie Mae or Freddie Mac requirements, or nonconforming because of size, documentation, property, credit, or another feature. Conventional does not mean that the government has no role in regulation.

FHFA set the 2026 baseline conforming loan limit for a one-unit property in most of the United States at $832,750. Higher limits apply in qualifying high-cost areas and special statutory areas. The limit changes by year, location, and unit count, so use the figure supplied on an exam unless the question clearly asks for current context.

An FHA loan is made by an approved lender and insured through the Federal Housing Administration program, which protects the lender against covered default losses. FHA underwriting, mortgage-insurance premiums, property eligibility, occupancy, loan limits, and program rules apply. FHA does not itself act as the routine lender in the standard insured transaction.

A private lender makes the loan and VA guarantees a portion for an eligible borrower. The borrower generally needs a Certificate of Eligibility and must meet lender and VA requirements, including occupancy for a purchase loan. VA may permit no down payment when price, value, entitlement, and other rules support it, but no-down-payment is not an approval guarantee.

USDA's Section 502 Guaranteed Loan Program works through approved lenders to serve eligible low- and moderate-income households buying or improving an adequate primary residence in an eligible rural area. The program can permit 100% financing, but income, location, property, occupancy, credit, and guarantee requirements still apply.

A fixed-rate mortgage keeps the note interest rate unchanged for its term, so scheduled principal and interest are stable. An ARM changes after its initial period according to the contract's index, margin, adjustment timing, caps, and floor. Taxes, insurance, association charges, and mortgage insurance can change even when the note rate is fixed.

A home-equity loan is closed-end credit, commonly paid as a lump sum with a repayment schedule. A HELOC is open-end credit that generally permits repeated draws up to a limit during the draw period, with available credit replenished as principal is repaid. Either may be a junior lien when a first mortgage already exists.

A reverse mortgage converts part of an eligible homeowner's equity into loan proceeds, with repayment generally deferred while program conditions are met. FHA's federally insured version is the Home Equity Conversion Mortgage. Borrowers remain responsible for required property charges, occupancy, and maintenance, and the growing loan balance reduces remaining equity.

A balloon mortgage uses a payment schedule that does not fully repay the debt by maturity, leaving a final payment substantially larger than the regular installments. Do not confuse a balloon payment with a normal final installment on a fully amortizing loan.

No. They are original practice questions aligned to the public Financing outline effective June 24, 2026.