Which types of mortgage loans are available?
Understanding common types of Mortgage loans
Thinking about making the move from renting to owning your own place? If you’re ready to start the homeownership journey, it’s super important to get a handle on all the different types of mortgages out there. Knowledge is power. You’ll want to understand the differences between loan types when it’s time to buy a home.
We’re here to help you get your head around this big choice. We’ll walk you through the most common types of mortgages that future homeowners like you tend to think about. From the standard fixed-rate and adjustable-rate mortgages to those government-backed loans and everything in between, we’re going to break down what each one means.
Let’s dive in and check out what makes each of these mortgage types unique. That way you can feel confident about making a choice that fits your financial plans and dreams of owning a home.
Are you ready to apply for a mortgage already? We can help! Get pre-approved today and start your journey into your new home.
What are the different types of mortgage loans?
Maybe you’ve even seen those mortgage names floating around when browsing home listings. Those acronyms —FHA, ARM, USDA, etc.— are not just alphabet soup. They have different uses and meanings. Knowing more about the different mortgage options may help with choosing the right loan for your needs and getting you that house you’ve been dreaming about.
Conventional mortgages
A conventional mortgage often comes from private lenders like a bank or a credit union directly. Conventional loans can come with a fixed- or adjustable-rate, they can be conforming, super-conforming or jumbo.
Key characteristics of conventional mortgages:
- Loan terms: Typically are 30 years long but it’s possible to get with shorter terms
- Interest rates: Your interest rates depend on multiple factors including credit health and remains the same throughout the life of the loan
Government backed mortgages (FHA, VA, USDA)
The federal government provides insurance for FHA, VA and USDA mortgages. These types of mortgages often make it easier for first-time home buyers to get a loan. Take a look at the detailed table below to better understand the differences between government-backed mortgages, and contact us to get additional information.
| Government-backed mortgage type | Characteristics |
| Federal Housing Administration (FHA) | Fixed rate loan. Minimum FICO scores apply. 3.5% down payment options availalable. Assistance with closing costs available. Loan limits change annually. Mortgage insurance is required. |
| Department of Veterans Affairs | Home loans for those with military service and their spouse Minimum FICO score applies Must be either an active-duty service member with 90 days of service, have served 181 days during peacetime or have 6 years of service in the national guard. Additional requirements may apply. |
| United States Department of Agriculture (USDA) | Higher credit and debt-to-income criterias than FHA loans, low interest rates, based on location of property and must be primary residence |
Adjustable-rate mortgage
Adjustable-rate mortgages (ARM) are perfect if you need a low fixed interest rate for the first few years of homeownership,followed by adjustable rates for the remaining life of the loan. There are different variations of an ARM home loan, depending on the length of time of each period of the loan (the fixed period and the adjustable period), these loans are typically 30 year mortgages.
| ARM | VARIATIONS | DESCRIPTION |
| 5-year | 5/6, 5/1 | 5 years with a fixed rate followed by 25 years of adjustable rates. Rates can adjust every 6 months or every year after the initial period. |
| 7-year | 7/6, 7/1 | 7 years with a fixed rate followed by 23 years in the adjustment period. Rates can adjust every 6 months or every year after the initial period. |
| 10-year | 10/6,10/1 | 10 years of a fixed rate followed by 20 years of adjustable rates. Rates can adjust every 6 months or every year after the initial period. |
How can I start on my mortgage?
Whether you still have questions or are ready to apply, it’s a good idea to connect with a lender. Our mortgage experts can help you find a mortgage that makes sense for your budget and lifestyle. You can start today with a quick mortgage pre-approval. We got you on this.
Do you still have questions on the different types of mortgages? We can help. Contact the team at Owning to get additional information. The answers you need are only a click away!
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