What are the different types of mortgages, and which is best for you? Let’s explore your options below.

Government Vs. Conventional Loans
Government loans are most commonly offered by the FHA (Federal Housing Administration), the VA (Veterans Affairs), and the USDA (Department of Agriculture). A conventional loan is considered a “normal” loan not backed by the government.

Government loans insure the lender against any losses that may result from a borrower, essentially protecting their interests. These programs offer low down payment options which are great for first-time buyers but keep in mind that you must also pay mortgage insurance as part of your monthly payments.

Fixed-Rate Vs. Adjustable-Rate Loans

First, you must decide whether you want a fixed-rate or adjustable-rate on your loan. With a fixed rate, your interest rates will always stay the same and won’t change for the remainder of the loan. An adjustable-rate will fluctuate from time to time. The benefit of the second option is that the initial interest rate stays low for a certain period of time. However, the amount on which the rate changes is unknown and depends on the market. For this reason, many like the stability that comes with getting a fixed rate.

Conforming Vs. Jumbo Loans

Once you decide where you want to borrow from, and what your terms will be, you must decide how much you want to borrow. Depending on the amount you want to take out, you’ll either want a conforming or a nonconforming loan.

Most people will fall under the “conforming” category under the guidelines set by Fannie Mae and Freddie Mac. These loans have certain limits that can’t be exceeded. This amount changes from year to year.

A nonconforming loan, like a jumbo loan, exceeds the limits of a conforming loan. Since these are a higher risk for the lender, these loans require excellent credit, have a proven history of paying debts, and a larger than average down payment. Interest rates are also higher in this case.

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