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Understanding Common Types of Mortgage Loans


There are many different types of mortgage loans. It’s important that you understand your options and the different factors you’ll want to consider before deciding which mortgage is right for you.


Fixed-Rate and Adjustable-Rate Mortgages

There are two main types of mortgages: fixed-rate and adjustable-rate mortgages. Each mortgage comes with its own set of features and benefits for you to consider.

Fixed-Rate Mortgage: This mortgage type has an interest rate that stays the same for the life of the loan. If you select a fixed-rate mortgage, you’ll pay the same monthly principal and interest payments for the term of your loan. However, your monthly mortgage payment could increase if taxes and homeowners insurance costs go up throughout the term of the loan. Unlike renting, this type of payment will remain the same month after month, even when inflation leads to higher prices. These loans are best for those who plan to stay in their home for the long term, often 10 years or more.

Adjustable-Rate Mortgage (ARM): With this mortgage type, the interest rate is only fixed for a set period and fluctuates up or down for the life of the loan. These loans usually start with a lower interest rate, so your monthly payments start lower. Many ARMs start with an initial fixed period of a few years before they start to adjust each year. Some adjust only once every few years. ARMs are usually more popular when long-term fixed rates are high. However, they may also be an option if you only expect to remain in the home for a short time, say 5 years or less, and want to take advantage of a lower rate. It’s important to note that once the loan starts adjusting, your monthly mortgage payment may increase.

Conventional Conforming Loans: You DO NOT need 20% for a down payment! You can get a conventional mortgage with just 3% down of the purchase price. The only stipulation is that you can not have owned a home in the last three years or you're a first time home buyer. Low monthly mortgage insurance premiums and some products you may qualify to receive $500-$1500 in lender credits (Freddie Mac Borrower Smart).

Other great mortgage loans to take advantage of:

Federal Housing Administration (FHA) Loans: FHA loans offer low down payment loans to eligible homebuyers — as low as 3.5% down. These loans are obtained through lenders but are insured by the federal government. They require a private mortgage insurance premium and allow lower credit scores than most conventional loans. Because of this, they tend to be more expensive than conventional loans.

  • United States Department of Agriculture (USDA) Loans: The USDA offers two home loan programs designed to make buying or building a home in a rural area affordable for those who are low- and moderate-income. The Single-Family Housing Guaranteed Loan Program is available for eligible homebuyers without a down payment, with a private mortgage insurance premium. The Single-Family Housing Direct Home Loan Program provides down payment assistance to increase an eligible applicant’s repayment ability.


  • U.S. Department of Veterans Affairs (VA) Loans: VA loans are made by lenders who participate in the VA Home Loans Program to eligible current or former members of the military or their eligible spouses. VA loans may not require a down payment or private mortgage insurance and have additional features that can make homebuying more affordable for military families.

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