Homebuying • Know your options
3 Mortgage Options for Homebuyers
Choosing the right mortgage type for your needs could save you thousands.
Finding the right mortgage takes some shopping around. There’s no shortcut, but a little homework now can save you years of second-guessing.
Start with three common options: conforming conventional loans, jumbo loans, and government-backed loans. Then compare the rate, fees, and payment structure that come with each.
You’re shopping for a home. Make sure you shop for the money, too.
Look beyond the advertised rate
The Rate Matters. So Does the Rest of the Deal.
A low rate gets your attention. The loan term, closing costs, mortgage insurance, and total interest deserve it too. A smaller monthly payment can still come with a bigger lifetime price tag.
At the same rate and loan amount, stretching repayment over more years increases total interest. Understanding how to structure your mortgage deal goes hand in hand with choosing your loan type.
Three paths to a home loan
Find the Fit. Then Compare the Fine Print.
Start with the loan category that fits your purchase and finances. A jumbo loan is a conventional loan too; its size puts it outside conforming limits.
Conforming Conventional Loans
These mortgages aren’t insured or guaranteed by the federal government and must fit the applicable conforming loan limit for the property’s location. Those limits can change each year.
You don’t necessarily need 20% down, but a smaller down payment usually means private mortgage insurance. Credit, income, and debt requirements depend on the loan program and lender.
Compare the full cost: rate, fees, mortgage insurance, and the cash you’ll need at closing.
Jumbo Loans
Bigger home price? You may need a bigger loan. Jumbo mortgages exceed the conforming loan limit for the property’s location.
Expect lenders to look closely at your credit, income, down payment, and reserves. Shop around: requirements and pricing can vary considerably.
A bigger approval isn’t a bigger budget. Leave room for the costs of owning the home, too.
Government-Backed Loans
FHA: The Federal Housing Administration offers lower-down-payment options and flexible qualification, with upfront and annual mortgage insurance costs.
VA: Eligible military borrowers and surviving spouses may qualify without a down payment or monthly mortgage insurance. A funding fee may apply.
USDA: Eligible buyers and properties may qualify for no-down-payment financing, subject to income, location, and program requirements. Program fees can apply.
A low down payment helps you get in the door. Compare ongoing costs before you walk through it.
Explore CFPB’s guide to mortgage types, VA purchase-loan benefits, and USDA income eligibility.
A separate choice: your rate structure
Fixed or Adjustable: Know What Can Change.
Your loan category is one decision. How its interest rate behaves is another.
Fixed-rate mortgage
A Steady Principal-and-Interest Payment
A fixed rate stays the same for the loan term, keeping your scheduled principal-and-interest payment steady.
What can still change? Property taxes, homeowners insurance, and other ownership costs. A fixed rate doesn’t freeze your entire housing budget.
Ask: How do the payment and total interest compare across the loan terms I’m considering?
Adjustable-rate mortgage (ARM)
A Starting Rate That Can Reset
An ARM starts with an introductory rate, then adjusts under the loan’s rules. Later rates depend on an index plus the lender’s margin, subject to adjustment caps.
What can change? Your rate and payment after the introductory period. Understand when adjustments begin, how often they happen, and how far the rate can rise.
Ask: Could I handle the payment after an adjustment if I’m still in this home?
“We’ll sell or refinance by then” shouldn’t be the only thing making the payment affordable.
Take a closer look at fixed versus adjustable-rate mortgages before choosing.
15 or 30 Years From Now…
You don’t know what the next few decades will look like. Right now, you just know you want to buy a home.
That doesn’t mean the future has to be a blank page. With a fixed-rate mortgage, you can calculate scheduled interest over the loan term. With an ARM, explore different rate scenarios. Either way, look beyond the first payment.
The total might make you wince. That’s a reason to compare your options and build a plan, not to sign the paperwork and forget about it.
More for the things that matter
Choose Your Mortgage.
Then Give It a Game Plan.
Getting approved is one milestone. Making the mortgage work with the rest of your life is the next.
Your lender can tell you the required payment. Money Max™ Account helps you explore what happens beyond it. Bring your mortgage, income, expenses, budget, and other balances into one financial picture. Forecast your cash flow, see what’s coming, and explore how putting available money toward principal could change your interest costs and payoff timeline.
Money Max helps you work through those decisions before the money leaves your account. Its Action Plan recommends payment amounts and timing based on your financial picture, while your Dashboard and Milestones help you track progress.
You still decide where your money goes. Now you can see how those choices could affect the road ahead.
Buy the Home. Keep Room for the Life You Want to Live in It.
Explore what your mortgage could look like with a plan behind it.
Schedule your free one-on-one Money Max walkthrough →
