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May 31, 2024

Types of Home Loans – And Which One is Right for You

If you're at the beginning of the home-buying process, you're likely giving a lot of thought to mortgage loans. Buying a house is a significant financial decision, and how you secure a loan to pay for it is a significant part of that. It's natural to wonder which loan is the best, but it's more important to consider, "Which one is right for me?" Let's take a deeper dive into this.

Fixed-Rate Conventional Loan

When you secure a fixed-rate loan, the interest rate remains the same throughout the life of your loan, resulting in a predictable monthly payment. There are two main types of fixed-rate mortgages: 30-year and 15-year. The 30-year fixed-rate mortgage is the most popular type of home loan, offering lower monthly payments due to its longer term. On the other hand, 15-year fixed-rate mortgages are often used for refinancing or by buyers looking to build equity quickly, although they come with higher monthly payments.

Who is this right for? Homebuyers looking for predictable monthly payments and flexibility to pay the loan off faster when desired.

Adjustable-Rate Conventional Loan

An adjustable-rate mortgage is relatively self-explanatory. Unlike a fixed-rate mortgage, the interest rate will change periodically throughout the loan term. The initial rate is set for a specific period and then adjusted. This initial rate is often lower than most other loans, allowing buyers to benefit from a few years of smaller payments.

Who is this right for? Homebuyers who intend to sell their home before the initial rate period is up, who plan to pay back their mortgage quickly, or who are optimistic rates will be lower.

FHA Loan

The Federal Housing Administration insures these mortgages, commonly known as "FHA” loans. These loans offer people the opportunity to purchase homes they might not otherwise be able to afford, but they require insurance. Individuals with down payments as low as 3.5% and credit scores around 580 can secure FHA loans to buy a home.

Who is this right for? First-time homebuyers with lower credit scores or smaller savings (typically with a down payment of less than 20%).  


The U.S. Department of Agriculture backs these loans as part of a mortgage assistance program. These loans are available to home buyers with lower incomes in their area, allowing for zero down payment and below-market mortgage rates. Closing costs can be financed into the loan, and there is no prepayment penalty. However, it's important to note that there are income limits based on location, so only some are eligible for this type of loan.

Who is this right for? Rural or suburban homebuyers who meet the USDA’s loan requirements.

VA Loan

The Department of Veterans Affairs (VA) offers a loan program to assist active duty service members, veterans, and their families in purchasing homes. VA loans provide the opportunity to buy a home with no down payment (as long as the sales price doesn’t exceed the appraised value) and with no requirement for private mortgage insurance (PMI). After entering into a contract, your lender will arrange for a VA appraisal of the property. It's important to note that the VA appraisal is not a home inspection but a VA requirement to ensure that the property meets fair market value and the VA's minimum property requirements.

Who is it right for? Active-duty service members, veterans, and eligible spouses. 

Buyers in all income brackets have numerous mortgage loan options available to them. However, no one-size-fits-all answer exists regarding which loan type is best for you. Working with an advisor who understands your financial situation is beneficial, as these basic descriptions can help you determine which loan is the most suitable for you.

Kelly & Megan
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