Conventional, jumbo, balloon, fixed, ARMs, reverse, combination —

What does it all mean?!

As you begin shopping for a house, you’re also going to start shopping around for a mortgage. And, heads up homebuyer, there are many types of mortgage repayment options out there!

Different mortgage products are designed to make purchasing a home possible for different types of people. So, what’s the best option for you?

You’ll probably consult with someone at a bank or loan office about what works for your budget and long-term financial plans, but as you begin discussing your mortgage options with various lenders, it’s a good idea to know the “lingo.”

To help you get started, here’s our list of 3 common mortgages available in Northeast Ohio!

Conventional Mortgage

Conventional mortgages (or fixed-rate mortgages) are one of the safest and most common types of home loans because they offer consistent, unchanging monthly payments. Because you lock in your interest rate at the beginning, you won’t have to worry about your loan becoming more expensive as the market shifts.

Available anywhere between 10 to 40-year repayment terms, lenders can usually find something that works for any monthly budget. However, most homebuyers will choose between a 15 and 30-year mortgage.

Interest-Only Mortgage

Interest-only mortgages give you the option to defer payments on your loan, only paying the interest on your mortgage for up to 10 years.

This type of mortgage is not the ideal for most homebuyers, but it can be a good option for those who need to buy a home but are struggling financially.

At the end of the deferment period, the remainder of the loan becomes due and is paid off like a conventional mortgage. Often times, it’s easier to get a lower interest rate on the “conventional” portion on the loan once the borrower has shown they can make regular payments on the interest-only portion.

Adjustable Rate Mortgage (ARM)

With an Adjustable Rate Mortgage, the interest rate on your home loan can change over time. This means that monthly payments will likely fluctuate for the term of the loan.

These types of loans often provide initially lower interest rates than the comparable fixed-rate/conventional option. If the economy is doing well, this rate will usually remain consistent or even drop. However, if there are changes in the cost of borrowing money or a low-performing economy, the interest will usually make your loan more expensive over time.

These types of loans are ideal for someone looking for the lowest-cost way to borrow money who can also afford to pay off their loan quickly — less than the conventional 15-year term.