Types of Mortgages: What to Know


When our parents were buying their first home, there was only one way to finance the purchase. They went down to the corner bank and asked for a 30-year mortgage. That was it. It was common to stay in the same house for the entire 30 years and they celebrated the final payment. That’s just not how financing works today.

First of all, it’s unusual for someone to keep a mortgage for 30 years. The average home owner moves every 5-7 years. Even paying off a mortgage might not be desirable as it’s one of the few tax breaks still available to the average person. Most financial advisors suggest using a mortgage as a financial planning tool.

Things have definitely changed.

Depending on your needs, there are a number of mortgage options you might consider, each with its own advantages and disadvantages:

  • Conventional: A conventional loan is still one of the most widely used types of mortgages. A conventional loan is normally still designed to be paid off in 30 years with equal monthly payments during the term of the loan. There are currently conventional loans that require as little as 5% down, although 20% is still commonplace.

  • FHA: An FHA loan is guaranteed by the Federal Housing Administration and is another commonly used loan. FHA financing is attractive for a number of reasons, especially for the first time home buyer. The down payment can be as little as 3.5% and that can be a gift. FHA also typically does not have as stringent credit score requirements and other traditional loan requirements. The loan limit varies by state and county, so check with your lender about specific limits in your area.

  • VA: VA (Veteran Affairs) is a loan program offered for Veterans and their spouses. This loan allows the borrower to borrow 100% of the home’s value in the loan. While there will be closing costs, there is no down payment required.

Your lender will also have more specialized options for you, such as adjustable rate loans and 10 or 15 year loans. They can also explain the additional costs that could be associated with each type of loan program. For instance, all loans with less than a 20% down payment will have Private Mortgage Insurance (PMI).

Part of purchasing a home is to find the right financing. Your lender will talk you through your options. If you have not already spoken to a lender, or if you need a referral, your real estate agent is a great resource for you.

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Phone: 608-333-1265

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Pleasant Grove, UT 84062