The Ultimate Guide to Different Mortgage Loans

Home Financing


2 min. read

By: FCU Team

When considering homeownership, research is the very first step all homeowners must undertake, and learning about the types of mortgages that are available to would-be homeowners is integral to a successful home buying experience.

What is a Mortgage?

Let’s start with the basics: what is a mortgage? A mortgage is a loan taken for the purchase of real estate, where the real estate, your new home, is used as collateral for the loan. Mortgages allow you to make purchases without having to pay the entire purchase price upfront. Of course, the catch is that you as the loan holder will need to make monthly payments to the lender, with interest.

Not too difficult to understand, right? Where it gets more challenging is with the introduction of different loan types and terms.

Types of Mortgage Loans

Now that we’ve laid the groundwork, let’s take a look at the five most common mortgage options. Some of these can still be very complicated, so while we’re offering a general and simplified overview, you should still take care to discuss these options with a mortgage loan officer.

Fixed-Rate Mortgages

As the name indicates, with a fixed-rate mortgage, the interest rate remains the same throughout the mortgage term. This makes a fixed-rate mortgage a great option for buyers who are planning to remain in their home for a long period of time or those who are budget focused. The same payment every month allows you to budget accordingly and make financial plans with more certainty, since you have a consistent payment.

Adjustable-Rate Mortgages

Adjustable-rate mortgages, or ARMs, have a variable rate that is usually lower than that of a fixed-rate mortgage, making it an attractive prospect for many buyers. ARMs typically have a fixed loan term. For example, a 5/1 ARM has a fixed term for the first 5 years before adjusting every year after. An ARM is a good option if you’re planning to be in a home a short time or have plans to refinance at the end of the fixed term.

Before making your decision, you should familiarize yourself with ARM terms like Floor Rates, Ceiling Rates, and Caps. These are associated with the minimum, maximum, and total percentage rates subject to change during the course of the loan.

While a bit more complicated, ARMs can provide unique benefits that a fixed-rate mortgage can’t!

Government-Backed Mortgages

FHA, VA, and USDA are all types of fixed rate mortgages offering additional benefits for qualifying buyers, and they offer benefits to both you and the lender. Because they’re government-backed, meaning they’re insured by a government agency, the lender assumes less risk. Less risk allows your lender to offer you a loan with a lower interest rate, as well as other benefits.

FHA Mortgages (Federal Housing Administration)

FHA mortgages are insured through the Federal Housing Administration and are a good choice for first-time homebuyers due to their low down payment option. With a FHA mortgage, you can borrow up to 96.5% of a home’s value, meaning you can put as little as 3.5% as a down payment.

VA Mortgages (Veterans Affairs)

VA mortgages are insured through the Department of Veteran Affairs. This product offers up to 100% financing for qualifying Veterans. They can also provide low interest rates, lower closing costs and less restrictive credit score criteria.

USDA Mortgages (United States Department of Agriculture)

USDA mortgages are insured by the U.S. Department of Agriculture due to their geographic restrictions. These loans are limited to rural and suburban areas, meaning that those living in urban areas (cities) are not eligible. This product also offers up to 100% financing, low interest rates, and approval restrictions based on income.



Only qualified lenders can offer government-backed loans, and Florida Credit Union can be counted among them. For more information on all of FCU's mortgage loans types, give one of our mortgage loan officers a call at 352-264-2649 or visit our website to apply!