A fixed-rate loan provides a fixed rate throughout the life of the loan, meaning the rate will not change 10, 20, or 30 years from now. A fixed-rate loan may be the better choice if you want stable payments and plan to live in your home long-term.

With adjustable-rate mortgages (ARMs), the interest rate will fluctuate over time. ARMs can either go up or down, which will affect your monthly payment. An ARM may be a good option if you only plan to live in your home for a few years.

With a conventional loan, the lender assumes the risk for lending you money. As a result, conventional loans have more stringent credit requirements and higher down payment requirements.

• Conforming loans are those that adhere to loan limits set by the Federal Housing Finance Agency (FHFA). As of 2022, the conforming loan limit is $647,200 for one-unit properties.
• Jumbo loans are those that exceed the conforming loan limits. Interest rates are usually higher on jumbo loans because they represent greater risk to the lender. There may also be stricter credit standards and underwriting requirements.

Government-Sponsored Loan

With a government-sponsored loan, such as FHA, VA, or USDA, the government backs the loan, or assumes the risk for lending you money. They typically have easier requirements to qualify for, and can have as little as no downpayment.

• FHA loans are backed by the Federal Housing Administration (FHA). Because of reduced requirements to qualify, borrowers are required to pay a mortgage insurance premium (MIP) on top of their monthly payment.
• VA loans are backed by the U.S. Department of Veterans Affairs, and require no down payment (100% financing) and no mortgage insurance. They are available to eligible veterans, active-duty members, reservists, National Guard members, and surviving spouses.
• USDA loans are backed by the U.S. Department of Agriculture, and are available for homes in eligible rural areas. While USDA loans do not require a down payment, they do require mortgage insurance.