There are two main types of home loans: government-backed loans and conventional mortgages.

Government-backed loans

The federal government insures or supports these loans. This helps protect lenders if a borrower cannot make loan payments.

Examples include:

• Federal Housing Administration (FHA) loans
• Veterans Affairs (VA) loans
• U.S. Department of Agriculture (USDA) Rural Development loans

Conventional mortgages

The government does not insure or support these loans. Instead, Fannie Mae and Freddie Mac help provide these loan programs.

Examples include:

• Adjustable-rate loans: The interest rate can change over time based on the terms of the loan. When the rate changes, the monthly payment may go up or down.
• Fixed-rate loans: The interest rate stays the same for the life of the loan. The principal and interest payment remains consistent.

*Fannie Mae is also known as the Federal National Mortgage Associations (FNMA). Freddie Mac is also known as the Federal Home Loan Mortgage Corporation (FHLMC). The purpose of these organizations are:

• To allow lenders to reinvest their assets into more lending by expanding the secondary mortgage market.
• To increase the number of lenders in the mortgage market and encourage them to offer lower interest rate home loans.

Visit our Home Loans page to learn more.