Mortgage and Loan Types Explained 

Common uses

• Double closings when an assignment of contract is not allowed

Who uses it

Real estate wholesalers

Typical structure

Repaid from the end buyer's funds at the second closing; fee based

Common uses

• Buying lots for future construction
• Land banking

Who uses it

Builders, developers, investors, individuals planning a home

Typical structure

Larger down payments and shorter terms than home mortgages

Common uses

• Building a primary or second home

Who uses it

Individuals building their own home

Typical structure

Construction phase with draws, then converts to a fixed or adjustable mortgage

Common uses

• Buying a fixer-upper to live in
• Financing major repairs

Who uses it

Homebuyers, homeowners

Typical structure

Long-term mortgage; repair funds held and released as work is done

Common uses

• Buying or refinancing a primary home, second home or investment property

Who uses it

Homebuyers with steady documented income and good credit

Typical structure

Commonly 15 or 30 years; private mortgage insurance usually required below 20% down

Common uses

• Financing high-value homes

Who uses it

Buyers in high-cost markets, high-income households

Typical structure

Stricter credit, reserve and down payment requirements than conforming loans

Common uses

• First home purchases
• Buying with a small down payment

Who uses it

First-time buyers, buyers with limited savings or lower credit scores

Typical structure

Down payment can be 3.5% with a qualifying score; mortgage insurance premiums apply

Common uses

• Buying or refinancing a primary home

Who uses it

Veterans, active-duty service members, eligible surviving spouses

Typical structure

Often no down payment and no monthly mortgage insurance; a funding fee usually applies

Common uses

• Buying a primary home in an eligible area

Who uses it

Low- and moderate-income buyers outside major cities

Typical structure

Often no down payment; property location and income must qualify

Common uses

• Long-term ownership with predictable payments

Who uses it

Homeowners and long-term rental investors

Typical structure

Common terms are 15 and 30 years

Common uses

• Lower starting payments
• Owners who expect to sell or refinance early

Who uses it

Homebuyers and investors with shorter holding plans

Typical structure

Named by fixed period and adjustment frequency, such as a 5/6 ARM; rate caps limit changes

Common uses

• Large one-time costs such as renovations

Who uses it

Homeowners with built-up equity

Typical structure

Fixed rate and fixed payments over a set term

Common uses

• Ongoing or uncertain costs
• Emergency reserves

Who uses it

Homeowners with built-up equity

Typical structure

Usually variable rate; a draw period followed by a repayment period

Common uses

• Retirement income
• Covering living costs

Who uses it

Older homeowners with substantial equity

Typical structure

Most are FHA-insured HECMs; counseling is required before closing

Common uses

• Buying a home when tax returns understate income

Who uses it

Self-employed owners, freelancers, gig workers

Typical structure

A non-QM product; lenders apply an expense factor to business deposits

Common uses

• Buying the building a business operates from
• Large equipment

Who uses it

Small businesses in most industries, including medical, dental, manufacturing and hospitality

Typical structure

Long fixed-rate terms; the business must occupy most of the property

Common uses

• Business purchases, expansion, working capital, owner-occupied real estate

Who uses it

Small businesses across most industries

Typical structure

Lender-made, partly SBA-guaranteed; real estate terms up to 25 years