If you are in the market for a new home, it’s important that you know what type of loans are available to you.  Whether you have perfect credit, a few financial blemishes or are just starting out in life and want to own a home, understanding your options will prove to be invaluable during your house hunting excursion.

Fixed Rate Mortgage

A fixed rate mortgage is one of the most popular home loans and is commonly available as a 15 or 30 year term.  Because it offers the borrower an assurance that both the principal and interest will remain the same throughout the term of the loan, a fixed rate mortgage is ideal for many.

Adjustable Rate Mortgage (ARM)

An adjustable rate mortgage, also referred to as an ARM loan, is one in which the interest rates adjust according to the current market.  This means that interest rates can either increase or decrease at regular intervals, based on established market indexes.

Interest-Only Mortgage

An interest-only mortgage is one that requires the borrower to pay interest only payments for a preset number of years during the loan term.  After that initial period, the monthly payments will then adjust to include both the principal and interest remaining on the loan.

Balloon Mortgage

A balloon mortgage is a loan that requires monthly payments that do not completely repay the loan.  At the conclusion of the balloon term, a large lump-sum payment is due to pay off the balance of the loan. 


An FHA and/or VA loan are mortgages that are guaranteed by the government.  An FHA loan is easier to qualify for than a conventional mortgage, requires a lower down payment and is guaranteed by the Federal Housing Authority.  A VA loan, which is for veterans only, is guaranteed by the Veteran’s Administration.

Construction Loan

Construction loans are available for borrowers who are purchasing or building a newly constructed home.  These loans, which are offered at either fixed or adjustable rates, require slightly more paperwork and inspections than a conventional mortgage.

No Income/No Asset Verification

A no income/no asset verification loan simply means that the borrower will not be required to verify their income or assets in order to obtain a mortgage.  With this type of loan, the borrower typically must have excellent credit and may be required to provide a down payment that’s equal to 20 percent or more of the total purchase price.  Although this type of loan is called a no income/no asset verification loan, the borrower may be required to show proof of both, but the information will not be verified by any other means.

Owner Financing

Many homebuyers, especially those with a limited or poor credit history, prefer to seek owner financing when purchasing a new home.  Because there is no credit check, buyers will not be judged for past credit problems.  In addition, owner financing may offer a low down payment requirement and competitive interest rates.