Types of Mortgages
Updated: Feb 16, 2019
Different properties and financial situations require different types of mortgages. A home’s size and location, as well as one’s income and assets, will determine the types of mortgages that best fits one’s situation. There are five different types of mortgages, which consist of:
- Conventional mortgages
- Jumbo mortgages
- Government-insured mortgages
- Fixed-rate mortgages
- Adjustable-rate mortgages
The first type is conventional mortgages. These are not insured by the federal government and instead are simple home loans. They can be conforming, meaning that they can follow and meet guidelines of US federal agencies, or nonconforming.
One example of a nonconforming mortgage is a jumbo mortgage – a loan that is most prominent in high-cost areas and exceed the limit of federal loans. This is because federal loans have a very limited amount they can offer and people who buy higher priced properties need larger loans than the federal agencies can provide.
Government-issued mortgages are – as the name states – loaned by the government in the three forms: the United States Department of Agriculture (USDA), Veterans Affairs (VA), and Federal Housing Administration (FHA). All three are given to low or middle-income people with a low credit store but willing to make a large down payment.
Fixed-rate mortgages are to be paid over the span of fifteen to twenty-five years and have the slightly higher interest rates than government-issued mortgages. This is to ensure that rising interest rates will not negatively affect the home buyer.
For those looking for a lower interest rate and a risk-free option, adjustable-rate mortgages are best. These are usually offered at the lowest interest rate out of all other mortgage options. There are different mortgages for the different needs and financial situations of home buyers.
Every home is different, and so is everyone’s situation, so remember to always consult your bank and asses your finances to choose the most fitting mortgage.