Fixed rate Mortgage
The interest rate stays the same for the entire term of the loan - usually 15 or 30 years - so the interest and principal portions of
your monthly payment remain the same. Your payments are stable and predictable, but initial interest rates tend to be higher on a
fixed-rate mortgage than on adjustable-rate loans.
Adjustable-rate mortgage (ARM)
The interest on an adjustable-rate mortgage is linked to a financial index, such as a Treasury security, so your monthly payments
can vary, up or down, over the life of the loan - usually 30 years. Some adjustable rate mortgages have a cap on the interest rate
increase to protect the borrower. The lower initial payments on ARM's make it easier for buyers to qualify.
A conventional loan can have as little as 3% down with mortgage insurance. To avoid mortgage insurance, you have to have a
minimum of 20% down. The maximum amount for conventional loans is $424,100. Loans above $424,100 require a jumbo loan.
The advantage of a conventional loan is that there is no upfront mortgage insurance payment and mortgage insurance can be
removed when you have paid the loan down to 80%
An FHA loan requires at least 3.5% down payment. The advantage of an FHA loan is that it has lower credit score guidelines and
allows higher debt to income ratios to qualify. This is generally a good choice for first time home buyers, but be sure to talk to a
trusted lender to determine if this is the right product for you.
A VA loan requires zero down payment and does not require mortgage insurance. It also has lower credit scored guidelines and
allows higher debt to income ratios. This loan is reserved for qualified veterans. To determine if you qualify, you can work with
your trusted lender to obtain your certificate of eligibility.
USDA loans require zero down payments, but they do require guarantee insurance, which is similar to mortgage insurance.
Homes are restricted to designated rural areas determined by USDA, and USDA has maximum household income limits for