Overview of Fixed-Rate Mortgages
A fixed-rate mortgage locks in your interest rate for the entire loan term, so your monthly principal and interest payment remains stable. This predictability makes it a popular choice for many homebuyers. According to the Consumer Financial Protection Bureau, fixed-rate loans were the choice for 85-95% of buyers between 2008 and 2022.
Fixed-rate loans come in various terms, with 15-year and 30-year being common. The longer term spreads out payments but you pay more interest over time. The shorter term has higher monthly payments but you build equity faster and pay less total interest.
- Interest rate stays the same for the life of the loan
- Monthly principal and interest payments do not change
- Best for buyers who expect to stay in the home long-term or prefer predictable budgeting
| Option | Category | Down payment minimum | Property type allowed |
|---|---|---|---|
| Conforming Conventional | loan_type | 3%–5% | Primary residence, second home, vacation property |
| FHA | loan_type | 3.5% (with 580+ credit score) | Primary residence only |
| VA | loan_type | 0% | Primary residence only |
| USDA | loan_type | 0% | Primary residence in eligible rural/suburban areas |
| Jumbo | loan_type | Typically larger (not specified) | Primary residence |
Sources: Consumer Financial Protection Bureau, Charles Schwab, Fannie Mae, Capital Bank, Bankrate
Overview of Adjustable-Rate Mortgages
An adjustable-rate mortgage (ARM) has an initial fixed-rate period, after which the interest rate adjusts periodically based on market conditions. Common structures include 5/6, 7/6, and 10/6 ARMs, where the first number indicates how many years the rate stays fixed, and the second number indicates how often the rate adjusts (in months). For example, a 5/6 ARM has a fixed rate for five years, then adjusts every six months.
ARM rate adjustments are typically subject to caps that limit how much the rate can change at each adjustment and over the life of the loan. This protects you from extreme increases, but your monthly payments can still rise or fall significantly after the fixed period.
- Initial lower rate compared to fixed-rate mortgages
- Rate and payments can change after the fixed period
- Caps limit how much the rate can adjust
- Suitable for buyers who plan to sell or refinance before the adjustment period begins
Sources: Consumer Financial Protection Bureau, Charles Schwab
Government-Backed Loans: FHA, VA, USDA
Government-backed loans are insured or guaranteed by federal agencies, making them accessible to borrowers who may not qualify for conventional loans. The three main types are FHA, VA, and USDA loans.
Sources: Consumer Financial Protection Bureau, Fannie Mae, Charles Schwab, Capital Bank, Bankrate
Conventional Loans and Jumbo Loans
- Jumbo: exceeds FHFA limit, typically larger down payment and stronger credit required
Sources: Consumer Financial Protection Bureau, Fannie Mae, Charles Schwab, Capital Bank
Comparing Loan Types
Choosing the right loan type involves comparing down payment requirements, mortgage insurance, credit score minimums, and property type restrictions. The table below summarizes key differences based on information from financial sources.
Keep in mind that specific loan terms can vary by lender, and your personal financial situation will influence which loan is best for you. Always verify current guidelines with official sources or a mortgage professional.
Sources: Consumer Financial Protection Bureau, Charles Schwab, Fannie Mae, Capital Bank, Bankrate
Frequently asked questions
What is the minimum down payment for an FHA loan?
For an FHA loan, the minimum down payment is 3.5% for borrowers with a credit score of 580 or higher. If your credit score is lower, you may need a larger down payment, but the exact amount depends on the lender.
Sources: BankrateCan I get a VA loan without military service?
No. VA loans are available only to eligible military service members, veterans, and surviving spouses. You must meet specific eligibility requirements set by the Department of Veterans Affairs.
Sources: Charles Schwab, BankrateAre adjustable-rate mortgages always riskier than fixed-rate?
Adjustable-rate mortgages carry more risk than fixed-rate loans because your rate and monthly payment can increase after the initial fixed period. However, they come with protective caps that limit how much the rate can change. If you plan to sell or refinance before the fixed period ends, an ARM can be a reasonable choice, but it is not always riskier if you understand the terms.
Sources: Consumer Financial Protection Bureau, Charles SchwabWhat is a jumbo loan and when is it needed?
A jumbo loan is a nonconforming loan that exceeds the conforming loan limit set by the FHFA. For 2026, the limit for a single-family home is $832,750. You need a jumbo loan if you want to borrow more than this amount. Jumbo loans typically require a larger down payment and a stronger credit profile.
Sources: Charles Schwab, Capital BankSources
- Understand the different kinds of loans available — Consumer Financial Protection Bureau
- Get to Know the Types of Mortgage Loans — Fannie Mae
- Types of Mortgages: Compare Home Loan Options — Charles Schwab
- Mortgage Loan Types Explained: A Complete Guide to Finding the Right Home Financing Option — Capital Bank
- 5 types of mortgage loans for homebuyers — Bankrate