Loan Types
Choose a mortgage structure that fits your timeline and budget.
Loan programs (FHA, Conventional, VA) describe eligibility. Loan types describe how the loan is structured—like fixed vs adjustable rates, and how payments change over time.
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Common loan types explained—without the jargon
Below are two popular loan structures many buyers consider. I’ll help you compare payment behavior, risk, and best-fit scenarios based on your goals.
Fixed-Rate Mortgage
Your interest rate and principal + interest payment stay the same for the life of the loan. Great for long-term stability and predictable budgeting.
Adjustable-Rate Mortgage (ARM)
Your rate is fixed for an initial period, then adjusts periodically based on an index. Often starts with a lower rate, but payments can change later.
5/1 ARM
A common ARM: fixed rate for 5 years, then adjusts once per year. Useful if you plan to move, refinance, or pay down the loan within the first few years.
Balloon Payment Loan
Lower payments for a set term with a larger final payment (the “balloon”). Best for specific strategies and borrowers who have a clear exit plan.
How to decide
Match the loan type to your plan—not just today’s rate
The “best” loan type depends on how long you’ll keep the home, how stable your income is, and how comfortable you are with future payment changes.
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Time horizon
Staying 7–10+ years often favors fixed-rate stability. Shorter timelines may benefit from an ARM’s initial fixed period.
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Payment flexibility
If you need the lowest initial payment, an ARM or balloon structure may help—but only if the future payment risk fits your strategy.
