Mortgage type overview

Today, there are more types of mortgages on offer than ever before. Read on for more information on the basic differences. Learning more about the industry will set you on the right path for finding the best mortgage rate.

The fundamental loan types are fixed-rate mortgages (FRMs) and adjustable-rate mortgages (ARMs). Basically, all available mortgage types fall into one of these two categories. The type that will give you the best mortgage rate depends on market interest rates at the time of your purchase.

FRMs guarantee a set interest rate for as long as you repay the loan. It is an especially good option when market rates are low. ARMs do not have a set interest rate; instead, it goes up or down according to market trends. It is an especially good option if market rates are high when you buy your house.

Both FRMs and ARMs are offered with low down payment options. In general, the best mortgage rates will be given to customers who can afford a substantial down payment. If you need to make a slightly smaller down payment, your interest rate will probably be slightly higher. Some borrowers qualify for government-sponsored programs that offer low down payment options accompanied by a low interest rate; obviously, if you are eligible, this is a good option.

You should also know that your mortgage can be conventional or jumbo. Your choice will depend mostly on the cost of the house you want to buy. If the price tag exceeds a certain amount, you will probably need a jumbo loan. Keep in mind that conventional loans usually provide the best interest rate.