Traditional mortgages (also called “forward” mortgages) include the standard mortgage products most people are familiar with, including 30-year fixed, 15-year fixed, 5/1 ARM, etc. Traditional mortgages are very simple to understand: you borrow a set amount of money at closing, then make payments on the balance until the loan is paid off.
Reverse mortgage professionals often refer to traditional mortgages as “forward” mortgages to distinguish them clearly from the reverse mortgages they work with every day.
The most common traditional mortgages include non-government-backed conventional mortgages, FHA-insured mortgages (HECM reverse mortgages are FHA-insured as well) , and VA mortgages, which are guaranteed by the Veterans Administration.
Conventional mortgages are the most popular and tend to have more stringent qualifying criteria than FHA and VA loans. FHA mortgages have become increasingly popular in recent years because they offer low down payments and have more flexible lending guidelines that make it easier for borrowers with bruised credit to qualify. VA loans have always been extremely popular among veterans because they’re relatively easy to get, have aggressive rates, and offer the ability to buy a home with no down payment.
Traditional conventional, FHA, and VA mortgages come in a variety of fixed and adjustable-rate “flavors”. The most popular fixed-rate traditional mortgage is the 30-year fixed, but other common fixed-rate options include 20-year, 15-year, and 10-year fixed.
Many lenders also offer various adjustable-rate mortgages, or ARMs. ARM products usually come with a 30-year term and commonly have initial fixed-rate periods that last the first 5, 7, or 10 years of the loan. So-called “fixed-period” ARMs such as these can be an attractive alternative to a 30-year fixed because the initial interest rates are often lower than a comparable 30-year fixed mortgage. Homeowners who only plan to keep the home for a handful of years may find a fixed-period ARM to be a great loan option.