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Which Loan Is Right for You

Deciding to buy a home is one choice that's followed by many others – including picking the mortgage that's right for you. There are several types of loans, each designed for a particular purpose.

Most lenders offer conventional loans and popular loans backed by the federal government, including Home Affordable Refinance Program (HARP) and Department of Veterans Affairs (VA).

  • Harp loans provide refinance options to borrowers who are current on their payments, but whose home values have declined or they have "underwater" mortgages. HARP loans are available until Dec. 31, 2015.
  • Conventional loans are not backed by the government, which may mean stricter qualification criteria related to credit rating and financial history. However, buyers may build equity sooner with a conventional loan since a bigger down payment is required.
  • ARMS (adjustable rate mortgages) have a fixed interest rate for up to seven years. The lower starting rate reduces the payment for that period, after which the interest rate may adjust annually. ARMs appeal to buyers who want a lower payment at first, plan to pay off their mortgage within 10 years or plan to move soon.
  • VA loans allow for zero-down payment to active and veteran military men and women and their surviving spouses who qualify based on income and credit rating.
  • Jumbo loans are specifically designed for more expensive property that would require a mortgage exceeding the conforming loan limit of $417,000 (higher in Alaska and Hawaii).
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You may have heard about various specialized mortgages, such as interest-only or balloon-payment loans. They generally carry a higher degree of risk for borrowers.

Online mortgage calculators only crunch numbers; they do not take your full financial situation into consideration. The key is to find a mortgage lender you can trust who will look at the full picture and recommend a mortgage that meets your needs.


Average annual savings for homeowners who have refinanced their mortgage using the Home Affordable Refinance Program. To be eligible for HARP, borrowers need to have originated their loan on or before May 31, 2009, and be current on payments.

Source: Federal Housing Finance Agency, 8/14