Conventional Fixed Rate Mortgage

This has long been the most popular loan option. It is typically a 30-year or 15-year loan with a fixed interest rate for the life of the loan. With a fixed rate loan, your interest rate and monthly payment will always be the same.

Adjustable Rate Mortgage (ARM)

With this loan, your initial interest rate is often below that of a fixed rate mortgage. The interest rate and monthly payment may go up and down over the years in relation to the financial market index to which it is keyed. For example, a three year ARM may offer a fixed rate for the first three years, with annual interest rate adjustments for the remaining term of the mortgage.

Balloon Mortgage

A balloon mortgage has a lower interest rate than a fixed rate mortgage, but the term in years is shorter than a conventional loan. With a 5-year balloon, for instance, the entire amount of the loan is due at the end of five years, at which time you would refinance the loan or pay the loan balance in full. Often there are built-in refinancing options for a balloon mortgage.

FHA Mortgage

FHA financing is guaranteed by the Federal Housing Administration (FHA). Because the FHA accepts the risk for this loan, a smaller down payment may be possible. You will, however, be required to purchase mortgage insurance. Both fixed and adjustable FHA loans are available.

VA Mortgage

VA financing refers to home loans guaranteed by the Veterans Administration. Only qualified veterans are eligible for this loan, which may be obtained from an approved lender without a down payment.