Mortgage loans are generally simple and straightforward concepts that can be differentiated based on the repayment terms, with interest rates that either remain the same throughout the loan period or vary due to market influences. They also differ based on the eligibility criteria. All these are influenced by the repayment terms and the amount of risk shouldered by the lender.

Each of these types have their eligibility criteria and deposit requirements. The most common types are explained briefly in the following paragraphs.

1. Conventional or Fixed Rate Mortgage

Conventional Mortgage Loans form a major chunk of US loans sanctioned every month. This mortgage is not insured by the federal government.

The interest rates for these loans (closing cost calculator Florida) are slightly higher but they remain the same all through the term of the loan.

The initial down payment or deposit can start as low as 3% when they are backed by the Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac).

Both these are government-sponsored entities controlled by the Federal Housing Finance Agency (FHFA). These loans are ideal for borrowers who have a strong credit rating, with a steady income and unbroken employment history, and who are capable of meeting the down payment of 3%.

2. Government Insured Loans

The federal government guarantees these loans. This can be classified into 3 types based on the agencies that govern these loans.

a) FHA Loans

FHA Loans or the Federal Housing Administration mortgage loans are under the control of the Department of Housing and Urban Development (HUD), under the federal government. All people, whether they are first-timers or repeat borrowers can avail of these loans. The lender is insured against losses by the government in the event of the borrower defaulting repayments. Though the initial deposit is low at 3.5% of the total purchase price, the borrower has to pay mortgage insurance, thus increasing the monthly installment.

b) VA Loans

This is a loan offered by the US Department of Veterans Affairs to people in military service and their families. These loans are also guaranteed by the federal government; therefore any losses suffered by the lender will be reimbursed when the borrower defaults.

This type of loan does not carry down payment, hence you can avail 100% loan.

c) USDA Loans

This is a loan promoted for the benefit of rural borrowers and comes under the control of the United States Department of Agriculture (USDA). The Rural Housing Service (RHS), a part of the Department of Agriculture manages this loan. These loans are disbursed to rural residents with low or modest income but which is steady.