Your Guide to Understanding Different Types of Mortgage Loans

Fixed-Rate Mortgages

When you think of a mortgage, a fixed-rate mortgage is probably what comes to mind. These loans have an interest rate that stays the same for the entire term. This means your monthly payments remain stable. It's a great option if you like predictability.

The most common terms are 15, 20, or 30 years. The longer the term, the lower your monthly payment. But remember, you'll pay more interest over time.

Adjustable start with a lower rate than fixed-rate mortgages. But after a set period, the rate can go up or down based on the market.

ARMs are a good option if you plan to move or refinance before the rate changes. They can save you money in the short term but come with more risk.

Interest-Only Mortgages

With an interest-only mortgage, you only pay the interest for a set period, usually 5-10 years. After that, you start paying both principal and interest. This can be helpful if you need lower payments early on.

But be careful. Once the interest-only period ends, your payments will go up. Make sure you're prepared for the increase.

Government-Backed Loans

FHA Loans

FHA loans are backed by the Federal Housing Administration. They are popular with first-time homebuyers because they require a lower down payment and have more relaxed credit requirements.

VA Loans

VA loans are available to veterans, active-duty service members, and eligible surviving spouses. These loans are backed by the Department of Veterans Affairs. They often come with no down payment and competitive interest rates.

USDA Loans</ help people in rural areas.

Jumbo Loans

Jumbo loans are for homes that cost more than the conforming loan limit. They have stricter credit requirements and usually require a larger down payment. But they allow you to buy a more expensive home.

These loans are common in high-cost areas where home prices are above average. If you're looking to buy a luxury home, a jumbo loan might be the way to go.

Which Mortgage is your risk tolerance.

It's always a good idea to talk to a mortgage broker. They can help you understand your options and find the best loan for your needs.

Remember, buying a home is a big step. But with the right mortgage, it can be a lot easier.