Varying types of mortgages explained in a simple way can make it easier to understand what’s available to homebuyers. In the U.S., home mortgages are either insured by the government (or not) and are then categorized by the structure of their interest rate. The most common types of mortgages are conventional ones like fixed-rate, adjustable-rate, and government backed ones (like FHA and VA loans).

Fixed-rate mortgages are the most popular mortgage in which you’ll have the same interest rate for the life of the loan. The loan terms are commonly either 30 or 15 years. Typically shorter terms will offer lower interest rates so you’ll not only pay off your home faster, you’ll pay less in interest over the course of the loan. 

An adjustable-rate mortgage might be ideal for the home buyer who only plans to stay in their home for a short period of time, or refinance the mortgage sooner than later. Why? The initial loan rate will be much lower for a starting period of time, and then the rate will adjust annually based on a market index. This means after the initial period your monthly mortgage payment will change.

Both of the above are examples of conventional mortgage loans. Government-backed loans like FHA and VA often offer more lenient terms to certain types of home-buyers. FHA loans are popular with first-time homebuyers with lower credit scores. And VA loans are for qualifying members of the service often offering no down payment and competitive interest rates.