Buying a home is an incredibly exciting experience, but it can be stressful to figure out how you’re going to finance such a large purchase. There are several different types of loans for purchasing homes, and it can be difficult to decide which one is right for you.


From conventional mortgages to government-insured mortgages, here are a few of the main types of home loans you’ll be able to choose from when purchasing a home.



Conventional Loans

A conventional mortgage is simply a loan that is not insured by the government in any way. Conventional loans include both conforming and non-conforming loans.


A conforming loan is a loan that meets the guidelines established by Fannie Mae or Freddie Mac. These are two government-controlled corporations that buy and sell mortgage-backed securities. Conforming loans conform to the criteria established by these two corporations. Alternatively, non-conforming loans are simply loans that do not meet these standards.


Conventional loans are best suited for people with strong credit, a stable income, and the ability to put down a relatively significant down payment.



Fixed-Rate Mortgages

Fixed-rate mortgages are loans that maintain the same interest rate over the life of the loan. This means that your monthly mortgage payments will always be the same. Typically, you can expect to get a fixed-rate loan in terms of 15, 20, or 30 years.


Generally, you’ll end up paying more on fixed-rate mortgages if you have a longer term. However, these loans make it much easier to budget your income as your monthly payments don’t change.

These loans are typically best for people who plan to live in their homes for at least 10 years as they provide more stability than adjustable-rate loans.



Adjustable-Rate Mortgages

Whereas fixed-rate loans offer unchanging interest rates, adjustable-rate mortgages offer interest rates that can increase or decrease over the life of your loan. Often, with these types of loans, your interest rates will remain constant for the first few years before changing to variable interest for the rest of your loan.


With these types of loans, it is important to ensure that your monthly payments won’t become unaffordable towards the end of the loan as your interest rate reaches its peak.

Adjustable-rate loans are typically best for people who don’t plan on taking too long to pay off the loan as you could potentially save a significant amount of money due to lower beginning interest rates.



Government-Insured Loans

There are three different types of government-insured loans: FHA loans, USDA loans, and VA loans.

FHA loans are typically for individuals with low credit and who aren’t able to afford significant down payments. FHA loans require you to pay two mortgage insurance premiums.


VA loans offer flexible and low-interest rates for members of the military. VA loans don’t require down payments but do require a funding fee to help offset the cost to the taxpayer.

Lastly, USDA loans help low or moderate-income individuals and families buy homes in rural areas. To get a USDA loan, you have to meet certain income requirements and buy a home in an eligible area.



Jumbo Mortgages

Jumbo mortgages are conventional, non-conforming loans, meaning that the home being purchased exceeds federal loan limits. Jumbo loans are exceptionally common in high cost-of-living areas. 

Jumbo loans tend to offer competitive interest rates, but require expensive down payments. Borrowers must also generally have an exceptional credit history.


Due to these requirements, jumbo mortgages are generally only ideal for affluent borrowers who are purchasing an expensive home.

These types of loans are likely what you will be choosing from before purchasing your home, so it’s important that you become familiar with the terms of each and decide which one suits your needs.