Fixed Rate Mortgage

Fixed rate loans have interest rates that remain the same throughout the loan’s term. You can choose between a 15 and 30-year fixed rate mortgage. With these loans, you’ll have peace of mind that your principal and interest payments will remain the same throughout the loan term.

30-Year Fixed Mortgage

The 30-year fixed mortgage is the most common mortgage loan chosen. It has the lowest monthly payment because the amount you borrowed is paid over 30 years. This means your principal and interest payments never change. The only way your mortgage payment would change is if your real estate taxes or homeowner’s insurance amounts changed.

15-Year Fixed Mortgage

This loan is fully amortized over a 15-year period and features constant monthly payments. It offers all the advantages of the 30-year loan, plus a lower interest rate and you’ll own your home twice as fast. The disadvantage is that, with a 15-year loan, you commit to a higher monthly payment. Many borrowers opt for a 30-year fixed-rate loan and voluntarily make larger payments that will pay off their loan in 15 years.

Adjustable-Rate Loans

Adjustable-rate loans have a fixed rate for the introductory period and then the rate adjusts annually. Most ARM loans are 30-year loans, and the rate is tied to a specific index. Your rate adjusts on the same date each year and depends on the index plus the predetermined margin added to the loan.

ARM loans are good for the following borrowers:

• Borrowers who expect their income to increase in a few years
• Borrowers who anticipate rates decreasing in the future
• Borrowers who know they will move in the next few years

FHA Loans

FHA loans are insured by the Federal Housing Administration (FHA). Essentially, the federal government insures loans for FHA-approved lenders in order to reduce their risk of loss if a borrower defaults on their mortgage payments. They have competitive interest rates but have more flexible guidelines than conventional loans. All FHA borrowers pay mortgage insurance for the life of the loan.

VA Loans

VA loans are also a government-backed loan option, but they are only for veterans of the military and/or surviving spouses. VA loans don’t require a down payment, and they have flexible underwriting requirements.

The VA doesn’t require a specific credit score or debt-to-income ratio. However, you must prove you can comfortably afford the loan and will have money left over for disposable income each month. You must also prove that you’re eligible for VA financing because you served enough time and have an honorable discharge.

Veterans don’t pay mortgage insurance on VA loans, but they do pay a funding fee at the closing.

Jumbo Loans

Jumbo loans are for anyone who needs to borrow more than the conventional loan limit of $647,200 (in 2022). A jumbo loan is a loan that exceeds the conforming loan limits as set by Fannie Mae and Freddie Mac. Rates tend to be a bit higher on jumbo loans because lenders generally have a higher risk.

Interest-Only Loans

Interest-only loans require interest-only payments for the first few years of the term. This is good for borrowers who expect their income to increase or who are just starting out in their career and need to break into their mortgage payments slowly. After the interest-only period, you’ll make principal and interest payments, but you’ll have less time to pay the principal back, so the total payment will be higher than if you borrowed a traditional 30-year fixed term.

Balloon Mortgage

A balloon mortgage has lower monthly payments initially with one ‘balloon’ payment due at maturity. Balloon loans are amortized over a traditional 30-year term, but they become due in 5 – 10 years depending on the term.

Balloon loans are good for those who need a lower payment initially or who might not qualify for a traditional loan but can improve their credit and/or income and refinance the loan before maturity.

HARP Loans

The Home Affordable Refinance Program ended, but lenders can still offer loan modifications to borrowers who need help. A loan modification doesn’t refinance your loan but instead modifies the original terms to make the payment more affordable.

You might extend your loan term, lower your rate, and have a portion of your principal forgiven depending on the circumstances and what’s available.

Reverse Mortgage

Homeowners ages 62 years and older who own their home may qualify for a reverse mortgage. Instead of borrowing money and making monthly principal and interest payments, you take money out of your home but don’t owe payments.

Interest accrues on the loan, but interest and principal are not due unless you sell the home, move out, or pass away. Upon maturity, the entire amount is due, but no homeowner will ever owe more than the home’s value even if the outstanding balance exceeds it.