Different Types of Mortgage Loans

Many home buyers are so excited and eager to jump into their journey to homeownership that they don't educate themselves on the many different types of mortgage loans that lenders offer. Are you one of them?

If so, it's time to rethink your approach. One of the most important steps is to learn about the different mortgage loans available to aspiring homeowners.

Types of mortgage loans for all homebuyers

Conventional mortgage loans

A conventional mortgage is the most common type of real estate mortgage. Qualifying typically involves a higher credit score (minimum of 620) and a lower debt-to-income (DTI) ratio. You can buy a home with as little as 3% down for a primary residence. With 20% down, you won't need private mortgage insurance (PMI).

30-year fixed-rate mortgages

One of the most common mortgage options with an interest rate that doesn't change throughout the life of the loan. Best for buyers who want lower monthly payments stretched over a longer period.

15-year fixed-rate mortgages

Similar to a 30-year fixed-rate mortgage but paid off in half the time. Higher monthly payments but you save money in interest payments overall.

Adjustable-rate mortgages

A home loan where the initial interest rate is set below market rate, then rises over time. May be a good option if you don't plan on having the mortgage for long.

FHA mortgage loans

Government-backed mortgages geared towards borrowers with low to moderate incomes. Buyers can put down as little as 3.5% and may qualify with a FICO score as low as 500.

VA mortgage loans

Designed for veterans, service members, and their surviving spouses. No down payment required, no PMI, and more competitive interest rates.

USDA mortgage loans

A zero-down payment mortgage for eligible rural home buyers backed by the U.S. Department of Agriculture.

Jumbo mortgages

For financing homes too expensive for a conventional conforming loan (over $647,200 in most counties). Typically require a credit score of 700+ and 10%+ down payment.

Interest-only mortgages

Requires the borrower to pay only the interest for a certain period, resulting in lower initial monthly payments. However, you're not building equity during this time.

Reverse mortgages

Geared toward older homeowners looking for cash. Each month, a lender sends the homeowner a check, turning equity into an interest-bearing loan.

Disclaimer: The content provided on this website is offered for educational purposes only. Visitors are advised to consult with qualified experts before making any financial decisions.