types of mortgagesIf you’re buying a home for the first time, then you’re just a few (dozen) signatures away from achieving the American dream. But many Americans don’t know very much about home loan rates or even what types of mortgages are available to them. To help you better understand your options as you go dream home hunting, here’s a rundown of the most popular types of mortgages in the United States.

Fixed Rate Mortgages
Fixed rate home loans are often the ideal choice for first-time homeowners. That’s because it’s just what it sounds like: your interest rate will be locked in for as long as you make payments. In short, the total cost of the loan combined with mortgage interest rates are split into equal monthly payments. That’s why the fixed rate, 30-year mortgage is most Americans’ first choice.

If you’re going for a fixed-rate mortgage, don’t hesitate to lock in a favorable rate as soon as it’s offered.

Risky Mortgages
There’s no one type of risky mortgages. Before the housing crisis of 2008, subprime mortgage lenders gave out insane amounts of risky home loans. Many of these were adjustable rate mortgages or balloon mortgages. What all these types of home loans had in common was that the borrowers couldn’t afford to pay off the debt long term.

Remember, financial experts say that your total monthly debt payments shouldn’t add up to more than 36% of your income.

Bad Credit Home Loans
Despite what you’ve heard, it’s not impossible to get relatively low interest home loans with bad credit. If you have poor credit, you still have a number of options to secure better mortgage rates. First, try to build up your credit score as much as possible. Also, you can usually counteract a bad credit score with a larger down payment, at least to some degree. Paying a large down payment, and sometimes paying in cash, can help cancel out that abysmal credit score. Speak with mortgage lenders in your area that work with bad credit borrowers to try and get the best interest rates for home loans available to you.

VA Home Loans
If you need low interest home loans, you won’t do better in the U.S. than a VA loan. In fact, VA loans are among the only zero interest loans available today. Of course, because these loans are backed by the Veterans Administration, you must be a qualified veteran (or their surviving spouse, in some cases) to apply for one.

Adjustable-Rate Mortgages
If you’re researching types of mortgages, you’ll hear contradictory things about adjustable rate mortgages. These loans allow you to lock in a favorable rate, usually for five to seven years. After that point, the interest rate will go up. That means these can be very low interest home loans, for awhile. But when your interest rates are eventually adjusted, you could be left in crisis mode. If you don’t plan to stay in your home long, these types of mortgages can really work in your favor.

There are other types of mortgages available, but for first-time homebuyers, these are most likely the most popular options for you to choose from. Good luck!