If you’re preparing to buy a house, purchasing a mortgage is likely on your agenda. This convenient loan service is the primary way most homeowners pay for their purchase. It’s a foreign topic for many, and it’s essential to understand your options. Below are common mortgage types to help you make the right choice.

Understanding Mortgage Types

1. Government-Insured

Government-insured or -backed mortgages are issued by the U.S. government to promote homebuying. Since the government backs them, they cover the losses if you can’t pay. There are several types. Federal Housing Administration (FHA) loans are ideal for first-time buyers or those with poor credit. VA loans target military veterans, and USDA loans target families buying farmland or homes in rural areas. Government-insured mortgages also aid people with low income that want to buy a house.

2. Jumbo

Jumbo loans exceed federal loan limits for people that want to buy a house in a high-cost area or that are purchasing an expensive home. You’ll need a steady, high income to qualify, and may enjoy more competitive interest rates based on that income. However, you’ll often have to provide a 10% to 20% down payment and need high credit and expensive assets that the bank can take if you default.

3. Fixed-Rate

Fixed-rate mortgages are the most common. They adhere to a repayment term—usually, 15, 20, or 30 years—with appropriate interest gathered based on the length. Shorter plans have higher monthly payments and lower interest rates. Longer repayment terms offer smaller payments—ideal for medium-income, first-time buyers—though gather more interest over the period.

4. Adjustable-Rate

Adjustable-rate mortgages are less common in the U.S. and offer fluctuating interest rates based on the real estate market. This can mean a lower rate in the first few years after buying. However, in a bad housing market, the payments can skyrocket, leading to a default.

If you’re ready to buy a house in the Denver, CO, area, contact Open Real Estate. These real estate professionals make customer service and market research a priority to ensure the best experience and outcome. They handle all aspects of buying or selling a property and maintain a large portfolio of real estate listings to explore online. Call (303) 232-1111 to schedule a consultation with an expert today.