Understanding Different Types of Mortgages

There is no “one size fits all” when it comes to mortgages. The loan program that is best for you will depend on your personal situation and finances. That’s why it’s important to understand the type of mortgage loan you are getting before signing the paperwork.

Common loan options include:

• Conventional Home Loans
  These loans are good for borrowers with excellent or good credit. Down payments can range from 3% to 20%.
  
  
• FHA Loans 
  Borrowers with lower credit scores can apply for these loans with a down payment as low as 3%. These loans require monthly Mortgage Insurance Premium (MIP) payments.
  
  
• VA Home Loans 
  To qualify for one of these loans, you must be an active military member, veteran, reservist or surviving spouse.
  
  
• USDA/Rural Development Home Loans
  Homes purchased with these loans must be in eligible rural areas. This is a good option for moderate-to-low-income buyers who meet income parameters because no down payment is required.

Know your interest rate type

Another important factor to consider is your interest rate type.

Interest rates on home loans include:

• Fixed-Interest Loans
  These loans have an interest rate that is set at the start of the loan. Your monthly principal and interest payment will remain the same for the duration of your loan.


• Adjustable-Rate Mortgage (ARM)
  With these loans, the lender can adjust the interest rate from time to time after the initial fixed rate. It’s important to understand the terms of this loan so you aren’t surprised by rate changes.



Learn everything you need to know about the homebuying process
by signing up for a free homebuyer class.