Buying a Home? Know These 4 Types of Home Mortgage Loans

Finding the ideal property is only half the battle unless you can pay for it entirely in cash. The second part is determining which sort of mortgage is right for you. You’ll most likely be repaying your mortgage over a lengthy period, so it’s critical to choose a loan that fits your demands and budget. When you borrow money from a lender, you enter into a legal arrangement to repay that debt over a certain period (although with interest). Choose the right mortgage by reading your options below!

Types of Mortgage for Home Loans

Conventional Mortgage Loans

A conventional mortgage is a house loan that is not federally insured. Conventional mortgage loans are classified into two types: conforming loans and non-conforming loans.

A conforming loan simply implies that the loan amount fits within the Federal Housing Finance Agency’s(FHFA) maximum lending limitations. Non-conforming mortgage loans refer to those that don’t adhere to the FHFA’s criteria.The most prevalent non-conforming loan is jumbo loans, which are huge mortgages that exceed the FHFA limitations for individual counties.

On many traditional loans, lenders often ask you to pay private mortgage insurance (PMI) if you put down less than 20% of the purchase price. Buyers with a steady income, at least 3% down, good credit, and employment will benefit the most from this option.

Fixed-Rate Mortgage Loans

Fixed-rate mortgage loans are paid off over an agreed-upon duration and at a fixed rate of interest, independent of changes and trends that may impact interest rates, causing them to rise or fall. Homebuyers can select between loans with terms of 10, 15, 20, 30, or even 50 years.

If interest rates in your location are high, you may want to avoid fixed-rate mortgages. If you lock in your interest rate, you’ll be stuck with it for the life of your mortgage until you refinance. If interest rates are high when you lock in, you might end up paying hundreds of dollars in interest. 

Interest-Only Mortgage Loans

Every type of house mortgage loan carries interest. This loan is so named because a borrower can pay the interest on a loan. This option is only available with this type of loan and is only accessible for a limited time.

Interest-Only mortgages are ideal for borrowers with a solid monthly cash flow, a rising income, substantial cash savings, or a variable income from month to month. Those who get big annual bonuses might also utilize them to pay down the principal debt.

Government-Backed Mortgage Options

Government-sponsored mortgage loans are backed by the federal government and offered by partner banks. If you default on the loan for any reason, the government provides a type of insurance coverage to the lender.

You may be interested in one of three types of government-backed mortgage loans:

FHA loans. Federal Housing Administration loans, designed for first-time and moderate-income purchasers, allow for a 3.5 percent down payment with a 580 FICO score or a 10% down payment with a 500 credit score.

USDA financing. Provided you qualify for a USDA loan, you can purchase a home in a rural region with no down payment if you live in a designated rural area.

VA loans. Veterans and their families can purchase a house with no down payment and no private mortgage insurance using VA mortgage financing.

If you are a first-time or repeat homeowner who does not satisfy the credit standards for a conventional mortgage loan, or if you wish to make a lesser down payment, a government-backed loan may be an ideal option for you.


You can pick the right house mortgage loan by matching its requirements with your income level and your available cash for down payment.

Are you looking for affordable home loans in Sacramento, CA? Hawkins Home Loans can help! Our financing service is the go-to solution for all your financing needs. Whether it’s for refinancing, home equity capitalization, or buying your first home, we’ve got you covered! Schedule an appointment with us today!