6 Types of Mortgage Loans for Homebuyers

If you are in the market for a new home, it’s important that you know what types of loans are available to you.

Whether you have perfect credit, a few financial blemishes or are just starting out in life and want to own a home, understanding your options will prove to be invaluable during your house-hunting excursion.medium_11705392445

Fixed Rate Mortgage

A fixed rate mortgage is one of the most popular home loans and is commonly available as a 15 or 30-year term.

Because it offers the borrower an assurance that both the principal and interest will remain the same throughout the term of the loan, a fixed rate mortgage is ideal for many.

Adjustable Rate Mortgage (ARM)

An adjustable rate mortgage, also referred to as an ARM loan, is one in which the interest rates adjust according to the current market.

This means that interest rates can either increase or decrease at regular intervals, based on established market indexes.

Short-Term Fixed/ARM Options

These are 30-year mortgages that are fixed for the initial period of 3, 5, 7 or 10 years.

They give you lower starting rates, and payments, and are meant for buyers who may not live in their home longer that that initial fixed period; or for people who might look to refinance in a few years, as rates can be as much as 1% lower than a straight fixed option.


An FHA and/or VA loan are mortgages that are guaranteed by the government.

An FHA loan is easier to qualify for than a conventional mortgage, requires a lower down payment, lower credit scores, and will allow higher “debt to income ratios in qualifying”…..these loans are guaranteed by the Federal Housing Authority. A VA loan, which is for veterans only, is guaranteed by the Veteran’s Administration.

Construction Loan

Construction loans are available for borrowers who are purchasing or building a newly constructed home. These loans, which are offered at adjustable rates only, require more paperwork, down payment, and inspections than a conventional mortgage.

They are short term financing vehicles, that are only in place while you build your home. When the home is completed you will have to get a new loan, called a “take out mortgage” which will be a standard fixed, or adjustable rate loan to pay off the construction financing.

Owner Financing

Many homebuyers, especially those with limited or poor credit history, may prefer to seek owner financing when purchasing a new home. Because the approval requirements are typically less, , buyers may not be judged for past credit problems. Finding a home where the seller is able to carry the financing for you is often a challenge as they usually need your new financing to pay off their debt. You would need to look for a seller who has a large equity position to handle this.

To learn more about what you should do before you buy your first home in the Bay Area, contact me today. I would love to help you through each step of the loan approval process.

Contact me today at408-506-0542, or email to kcimera@goloanstar.com.


Loan Star Lending NMLS# 181709 – CA# 603K799



Karen Cimera

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