Most borrowers look at two basic loan programs: a fixed-rate mortgage or an adjustable rate mortgage. The only difference between the two types of loans is how the interest is attached to the loan, either a steady interest rate or a sliding rate that adjusts with the national prime.

Hybrid loans often have more relaxed standards than traditional lending programs. There are a variety of loan programs that fall under the hybrid label.

Piggy-back Loans

Piggy-back loans allow borrowers to buy a home with either a very small down payment, or save money by forgoing private mortgage insurance (PMI). With this program, two loans are taken at the same time. A first mortgage which covers 80% of the home value and a second mortgage that covers the rest of the home value (usually between 5 and 15%). This type of loan program is great because it allows you to have a lower combined monthly payment than you would with a traditional loan program.

Convertible ARMs

An ARM is an adjustable rate mortgage. Two-step Mortgages

There is usually a ceiling which limits how much the interest can increase based on the initial rate, although the rate can drop if the market rate decreases.

There are even more loan programs available, options that allow you to make additional periodic payments, sometimes called balloon payments or graduated payments.

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