The 5 Most Common Types of Home Mortgages

If you’re buying a home in Boston, you probably need a mortgage – most people do. The problem is that there are many types of home mortgages available on the market, and it can be confusing to know which one is right for you. This guide explains the five most common types of home mortgages: Fixed-rate loans, adjustable-rate loans, VA loans, USDA loans and FHA loans. It also covers tips to help you choose the right mortgage for you and what to ask a lender before you commit.

The 5 Most Common Types of Home Mortgages

These are the most common types of home mortgages:

Fixed-rate loans
Adjustable-rate loans
VA loans
USDA loans
FHA loans

Here’s a closer look at each.

Common Mortgage Type #1: Fixed-Rate Loans

With a fixed-rate loan, the interest rate stays the same for the entire life of the loan. This means your monthly payments will stay the same, too, making it easier to budget for your mortgage payments.

Fixed-rate loans are a good choice if you:

Want predictable monthly payments
Plan to stay in your home for a long time
Have good credit and can qualify for a low interest rate

Fixed-rate loans are available in both 15-year and 30-year terms. The shorter the term, the higher your monthly payments will be, but you’ll save money in interest over the life of the loan.

Common Mortgage Type #2: Adjustable-Rate Loans

With an adjustable-rate loan, the interest rate changes periodically, based on market conditions. This means your monthly payments could go up or down.

Adjustable-rate loans are a good choice if you:

Expect your income to increase over time
Plan to stay in your home for a shorter period of time
Are comfortable with the risk that your monthly payments could increase

Adjustable-rate loans are available in 5/1, 7/1 and 10/1 terms (as well as other terms, but these are the most common). The first number is the length of the initial fixed-rate period, and the second number is how often the interest rate can adjust after that. For example, with a 5/1 loan, the interest rate is fixed for five years and then can adjust once per year.

Common Mortgage Type #3: VA Loans

A VA loan is a mortgage loan available to eligible veterans, active-duty service members and, in some cases, their spouses. These loans are also available to a small number of other government workers, too. VA loans are available with fixed or adjustable interest rates and come with many benefits, such as no down payment or private mortgage insurance required.

VA loans are a good choice if you:

Are a veteran, active-duty service member or spouse
Qualify for a low interest rate
Can make a down payment

To qualify for a VA loan, you’ll need a Certificate of Eligibility from the Department of Veterans Affairs. You can get this certificate by contacting your local VA Regional Loan Center.

Related: What is a VA loan?

Common Mortgage Type #4: USDA Loans

USDA loans are available to eligible homebuyers in rural and suburban areas. USDA loans come with many benefits, including no down payment and low interest rates.

USDA loans are a good choice if you:

Are buying a home in a rural or suburban area
Qualify for a low interest rate
Can make a down payment

To qualify for a USDA loan, you’ll need to meet certain income and credit requirements. You’ll also need to purchase a home in an eligible area. To find out if your area is eligible, contact your local USDA Rural Development office.

Common Mortgage Type #5: FHA Loans

FHA loans are available to all qualified homebuyers, but they’re especially popular among first-time buyers. FHA loans have many benefits, including low down payment and credit requirements.

FHA loans are a good choice if you:

Are a first-time homebuyer
Have limited cash for a down payment
Have less-than-perfect credit

To qualify for an FHA loan, you’ll need to meet certain credit and income requirements. You’ll also need to purchase a home in an eligible area. To find out if your area is eligible, contact your local HUD office.

Are You Buying or Selling a Home in Boston?

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The 5 Most Common Types of Home Mortgages