Types of Mortgages: A Comprehensive Guide

When it comes to buying a home, finding the right property is only half the battle. The other half is choosing the best type of mortgage for your needs and budget. A mortgage is a loan with an interest rate that is set for a certain period of time, usually 30 years. There are many different types of mortgages available, each with its own pros and cons.

In this article, we'll explore the most popular mortgage loans, including the 30-year fixed-rate mortgage, 15-year fixed-rate mortgage, FHA mortgage, conventional loan, jumbo loan, VA loan, and USDA loan.

30-Year Fixed-Rate Mortgage

The 30-year fixed-rate mortgage is the most popular type of mortgage loan. It has an interest rate that stays the same for the entire 30-year term. This makes it easier to budget for your monthly payments since they won't change over time.

The downside is that you'll pay more in interest over the life of the loan compared to other types of mortgages.

15-Year Fixed-Rate Mortgage

The 15-year fixed-rate mortgage has an interest rate that stays the same for its 15-year term. This type of mortgage is often used for refinancing since it offers a lower interest rate than a 30-year fixed-rate mortgage. The downside is that you'll have higher monthly payments since you're paying off the loan in a shorter amount of time.

FHA Mortgage

An FHA mortgage is a loan insured by the Federal Housing Administration (FHA). These loans are backed by the government and designed to help borrowers with modest means buy a home. They usually require a down payment of 10% or more and allow down payments as low as 3.5%. FHA loans also have more relaxed credit rating requirements than conventional loans, so borrowers with lower credit scores may qualify.

However, all borrowers must pay an annual upfront mortgage insurance premium (MIP).

Conventional Loan

A conventional loan is a loan that is not backed by the federal government. Borrowers with good credit, stable employment history and income, and the ability to make a 3% down payment can generally qualify for a conventional loan backed by Fannie Mae or Freddie Mac, two government-sponsored companies that buy and sell most conventional mortgages in the United States. To avoid the need for private mortgage insurance (PMI), borrowers generally need to make a 20% down payment.

Jumbo Loan

Jumbo loans are the most common type of non-conforming loans.

They are called jumbo because loan amounts generally exceed compliant loan limits. These types of loans are riskier for a lender, so borrowers generally need to show larger cash reserves, make a down payment of 10% to 20% (or more), and have strong credit.

VA Loan

Low-moderate-income buyers buying a home for the first time often turn to loans insured by the Department of Veterans Affairs (VA) when they can't qualify for a conventional loan. Borrowers can finance 100% of the loan amount with no down payment required and enjoy better interest rates and lack of PMI or MIP.


The Department of Agriculture (USDA) secures loans to help make homeownership possible for low-income buyers in rural areas nationwide. These loans require little or no down payment for qualified borrowers, as long as the properties meet USDA eligibility rules. When it comes to choosing a mortgage, there are many options available.

It's important to do your research and find one that fits your needs and budget. With so many different types of mortgages available, you're sure to find one that works for you.

Rosanne Pacana
Rosanne Pacana

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