If you are in the market for home loans, you may be surprised at the sheer number of available options. From adjustable rate mortgages to balloon mortgages to zero-down first time buyer incentives, home loans are available in a wide variety of shapes and sizes. Here is a quick guide to several popular types of home loans.

Conventional Loans
Undoubtedly, you are familiar with conventional loans. These are the traditional home loans that are offered through banks or other normal lending institutions. What you may not be aware of is that these loans are divided into two basic types: fixed rate and adjustable rate.

Fixed Rate – With a fixed rate mortgage, your interest rate is set at the time that you purchase the house. Your payments will be the same each month for the life of the loan. This is a terrific option for those who feel most comfortable budgeting a certain amount for their house payment and plan to live in the home for more than ten years. However, the major disadvantage is that if interest rates drop in the future, you will be stuck at the same interest rate unless your refinance.

Adjustable Rate – In an adjustable rate mortgage, your interest rate will fluctuate. Normally the first few years of the mortgage provide a rate that is fixed at lower than the prevailing fixed interest rate. After that introductory period, however, your interest rate will adjust to whatever the prevailing rate is at that time. Since you never know whether the future rate will be higher or lower than the current rate, this is a major gamble if you plan to stay in the house. However, if you plan to sell within the introductory period, an adjustable rate mortgage may be your best option.

Unconventional Loans
If you have a spotty credit history or little money for a down payment, you may qualify for one of the many unconventional loan products currently on the market. The Federal Housing Authority, Veterans Administration and Rural Housing Service all offer a variety of customized home loans for those who may not be eligible for conventional loans.

Unconventional loan programs include interest-only mortgages, in which you may elect to pay only the interest for a certain period of time. Zero down payment home loans are also popular, as the guarantee services provided by these organizations replace the mortgage insurance that would otherwise have to be purchased on this type of mortgage. A no-document mortgage may be the best option if you are self-employed or otherwise in an unusual situation.

The Bottom Line
There are an immense number of choices available in home loans today. If you are in the market for a new home, shop around carefully to find the best product for your situation. You can find extensive information and calculators for each product online, which can help you narrow down your options considerably. Remember to look at all of the factors, and never buy more home than you can afford.