Fixed Rate Mortgage
These loans are the most popular, representing over 75% of all home loans. They usually come in terms of 30, 15, or 10 years, with the 30-year option being the most popular. This is a fully amortizing mortgage loan where the interest rate on the note remains the same through the term of the loan, as opposed to loans where the interest rate may adjust or "float".
As a result, payment amounts and the duration of the loan are fixed and the person who is responsible for paying back the loan benefits from a consistent, single payment and the ability to plan a budget based on this fixed cost.
Adjustable Rate Mortgage
An adjustable-rate mortgage (ARM) is a loan with an interest rate that changes. An adjustable rate mortgage may start with lower monthly payments vs a fixed-rate mortgages, but keep in mind your monthly payments could change. They could go up, sometimes significantly even if interest rates don’t go up. Your payments may not go down much, or at all even if interest rates go down. You could end up owing more money than you borrowed even if you make all your payments on time. If you want to pay off your loan early to avoid higher payments, you might have to pay a prepayment penalty.
Lenders generally charge lower initial interest rates for adjustable rate mortgages than for fixed-rate mortgages. At first, this makes the adjustable rate a lower monthly payment compared to a fixed-rate mortgage for the same loan amount. Possibly, your ARM could be less expensive over a long period than a fixed-rate mortgage—for example, if interest rates remain steady or drop lower.
FHA Loans
Launched in 1934 to help boost the housing market, the Federal Housing Administration (FHA) loan is still pretty much the same today. It’s a government-backed loan that allows people to buy a moderately priced home with a down payment as low as 3.5 percent.
The government doesn’t actually lend the money, but it does insure the mortgages. That way, if the borrower can’t repay the loan, the FHA insurance reimburses the lender. This allows mortgage lenders to offer loans to less affluent applicants who might otherwise be denied.
Rural Development
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USDA loans are mortgages backed the U.S. Department of Agriculture as part of its USDA Rural Development Guaranteed Housing Loan program. USDA loans are available to home buyers with below-average income, offer 100% financing with reduced mortgage insurance premiums, and feature low mortgage rates.
Using a USDA loan, buyers can finance 100% of a home's purchase price while getting access to better-than-average mortgage rates. This is because USDA mortgage rates are discounted as compared to rates with other low-down payment loans.
Department of Veterans Affairs (VA)
VA helps servicemembers, veterans, and eligible surviving spouses become homeowners. As part of our mission to serve you, we provide a home loan guaranty benefit and other housing-related programs to help you buy, build, repair, retain, or adapt a home for your own personal occupancy.
VA Home Loans are provided by private lenders, such as banks and mortgage companies. VA guarantees a portion of the loan, enabling the lender to provide you with more favorable terms.
Reverse Mortgage
A reverse mortgage is a loan available to homeowners, 62 years or older, that allows them to convert part of the equity in their homes into cash.
The product was conceived as a means to help retirees with limited income use the accumulated wealth in their homes to cover basic monthly living expenses and pay for health care. However, there is no restriction how reverse mortgage proceeds can be used.
​The loan is called a reverse mortgage because instead of making monthly payments to a lender, as with a traditional mortgage, the lender makes payments to the borrower.
Conventional
Mortgage
Conventional mortgage loans, although not insured by the federal government, must adhere to the mortgage guidelines set by the Federal National Mortgage Association, also known as Fannie Mae and the Federal Home Loan Mortgage Corporation, often referred to as Freddie Mac. Unlike federally insured loans, conventional loans carry no guarantees for the lender in the event the borrower defaults.
If you have good credit, a steady income and can afford the down payment, conventional loans often offer lower interest rates than their government-insured counterparts. Whereas FHA loans require a property to meet strict eligibility guidelines as far as price, location and habitability are concerned, conventional lenders aren’t bound by the same bureaucratic regulations. Thus, lenders can often process conventional mortgages more quickly than government-insured mortgages. Also, the higher down payment requirement of conventional loans helps you build equity more quickly.