There are many types of mortgage loans available on the market, and each is designed to appeal to a wide range of borrowers’ needs. Here is a short guide on each type that is available:
30-Year Fixed Mortgage
This type of mortgage is a home loan that has an interest rate set for its entire 30-year term.
It works best for home buyers wanting the lower monthly payment coming from stretching out repayment over a long time. It also makes the monthly payments predictable and gives the flexibility to repay the loan faster by adding to monthly payments.
15-Year Fixed Mortgage
This type of mortgage comes with an interest rate that remains stagnant over its 15-year term.
This works best for refinancers and home buyers wanting to build equity and pay off their loans faster. The payments are predictable and the borrower pays interest for fewer years.
Adjustable Mortgage
This type of mortgage is a home loan with an initial rate fixed for a specified period that then adjusts periodically. It best suits home buyers that aren’t planning on having a mortgage for a long time, or that believe interest rates will reduce in the future.
FHA Mortgage
This mortgage is a home loan that is insured by the Federal Housing Administration and designed to help borrowers of modest means buy a home. It works best for borrowers with lower credit scores and a down-payment of less than 20%.
VA Mortgage
VA mortgages are backed by the Department of Veterans Affairs and are available to military service members and veterans, working best for military-affiliated borrowers who prefer a low-interest rate and no-down-payment minimum.
USDA Mortgage
USDA mortgages are backed by or issued by the U.S. Department of Agriculture and work best for income-qualified buyers in rural areas who want a low or zero down-payment.
Jumbo Mortgage
Jumbo mortgages are loans above a certain dollar amount, the limits of which vary by county and are adjusted periodically. They work for buyers of expensive homes and owners wanting to refinance jumbo-size mortgages.
Interest-Only Mortgage
This mortgage requires payments only on the lender’s interest charge, with the loan balance not reducing during the interest-only payment period. This works for borrowers with high monthly cash flows, rising incomes, or incomes that vary from month to month.
