6 Types of Mortgages You Should Know
Buying a home is exciting, but understanding your mortgage options is just as important. Different types of mortgages have different terms, interest rates, and benefits. Here’s a guide to the 6 main types of mortgages you should know.
1. Fixed-Rate Mortgage
A fixed-rate mortgage has an interest rate that stays the same for the entire loan term, usually 15, 20, or 30 years. This means your monthly payments remain consistent, making it easier to budget.
Best for: Homebuyers who want stability and predictable payments.
2. Adjustable-Rate Mortgage (ARM)
An adjustable-rate mortgage has an interest rate that changes over time, often after an initial fixed period (like 5 or 7 years). Monthly payments can increase or decrease based on market rates.
Best for: Buyers who plan to sell or refinance before the adjustable period begins.
3. FHA Loan (Federal Housing Administration Loan)
An FHA loan is a government-backed mortgage that requires a smaller down payment, usually as low as 3.5%, and easier credit requirements. The loan is insured by the FHA, which protects the lender.
Best for: First-time homebuyers or those with limited savings or lower credit scores.
4. VA Loan (Veterans Affairs Loan)
A VA loan is available to eligible veterans, active-duty service members, and some military spouses. VA loans often require no down payment and have lower interest rates. The VA guarantees the loan, reducing lender risk.
Best for: Military personnel looking for favorable loan terms.
5. USDA Loan (United States Department of Agriculture Loan)
A USDA loan is designed for buyers in rural or suburban areas. It often offers no down payment and low interest rates. The USDA guarantees the loan to support homeownership in qualifying areas.
Best for: Homebuyers in eligible rural or suburban regions.
6. Jumbo Loan
A jumbo loan is a mortgage that exceeds the conforming loan limits set by Fannie Mae and Freddie Mac. Because these loans are larger, they usually require a higher down payment and stricter credit qualifications.
Best for: Buyers purchasing high-value properties above standard loan limits.
Key Takeaway
Choosing the right mortgage depends on your financial situation, credit, and long-term plans. Fixed-rate loans offer stability, ARMs offer flexibility, and government-backed loans help first-time or eligible buyers. Understanding the differences helps you make a confident decision when financing your home.
The opinions expressed within this article may not reflect the opinions or views of CrossCountry Mortgage, LLC or its affiliates. All loans subject to underwriting approval. Certain restrictions apply. Call for details. All borrowers must meet minimum credit score, loan-to-value, debt-to-income, and other requirements to qualify for any mortgage program. This is not a commitment to lend.