Your lender will have a variety of options to consider when choosing a mortgage type. Below are high-level overviews of some typical loan types.
A conventional loan consists of a fixed interest rate and payment schedule over the life of the loan. This type of loan is usually more lenient with regards to the appraisal and condition of the property.
The Federal Housing Administration insures FHA loans. These loans require a smaller down payment than conventional loans and have less stringent qualifying guidelines. However, there is a cap on the loan amount and “fixer upper” properties may not qualify.
The Veterans Administration guarantees VA loans. A certificate of eligibility is required to receive this type of loan. To qualify for a certificate of eligibility, a minimum of 180 days of active service must be completed. Frequently no down payment is required when financing through a VA loan.
ARMs have interest rates that are set for a specific period of time and then adjusted, on an annual basis, to reflect a specific interest rate index. The initial interest rate can be set for up to five years before the annual rate adjustments are implemented.