Types of Mortgages

Mortgages offer homebuyers a range of options to suit their individual needs and preferences. The type of mortgage that works best for you depends on factors like your credit score, debt-to-income ratio and estimated down payment amount.

Fixed-Rate Mortgages – Fixed rate loans offer an ongoing fixed interest rate that remains fixed throughout the life of the loan. Popular 30-year terms are offered, though 15 and 10 year options are also available.

Adjustable-rate mortgages (ARMs) – An adjustable-rate mortgage (ARM) is similar to a fixed rate loan in that it features an introductory interest rate and one that may adjust over the life of the loan. ARMs are often chosen by homebuyers who plan to sell or refinance within several years; they’re especially helpful for first-time buyers or those wishing to build equity faster in their homes.

Jumbo mortgages – Jumbo mortgages refer to loans that exceed the limits set by government-sponsored entities Fannie Mae or Freddie Mac, often sold directly to investors by lenders.

Conventional mortgages – These are the most popular home loan type. Because they’re guaranteed by government-sponsored entities, conventional mortgages usually have stricter credit criteria than nonconforming loans and usually require a larger down payment than alternative financing options.

USDA/FHA Loans – These loans can be a great option for homebuyers with no large down payment and good credit history. While they have more stringent requirements than conventional mortgages and lower qualifying rates, they may still be less costly than other loan types.

VA Loans – Veterans can borrow from the VA to purchase a home with low down payment and no private mortgage insurance. VA loans come in various terms, such as interest-only or no points.

Reverse mortgages – Reverse mortgages enable homeowners to access funds from their homes without having to sell them. They may be beneficial for those who need extra spending money during retirement but don’t want to leave their properties to heirs.

Bridge Loans – Bridge loans allow homebuyers to purchase a new residence before selling their current one, providing an ideal solution for those with limited cash but needing to move before their real estate timelines coincide. They’re an excellent option for people who require time to sell their current residence before closing on a new one.

Bankrate’s balloon mortgage calculator can assist you in determining if this loan is suitable for your situation.

Typically, those who take out balloon mortgages should budget their money carefully and determine the final payment that must be made at the end of the loan term. This type of loan can become challenging to manage if you’re unprepared or your credit situation worsens.

Additionally, it’s wise to consult with multiple lenders and obtain quotes for each type of mortgage. Compare interest rates, terms and fees before determining which one best meets your financial requirements.