Which Mortgage is Right for You?

There are several types of mortgages available for homebuyers in 2023. Not sure which is right for you? Let’s check out...

Suzanne Damon
September 5th, 2023
5 min read

There are several types of mortgages available for homebuyers in 2023. Not sure which is right for you? Let’s check out the options.

Conventional mortgages

Conventional mortgages are the most common type of mortgage. You can get this type of loan at almost any mortgage lender, and the requirements are fairly standard. To qualify for a conventional mortgage, you must have the following:

Credit score of at least 620, though some lenders have higher requirements
Debt-to-income ratio of 45% or less
Minimum down payment of 3% with private mortgage insurance
Minimum down payment of 20% without private mortgage insurance
Property appraisal verifying the home’s condition and value

Conventional mortgages are a good fit for you if you meet the requirements and you’re looking for a quicker option. Typically, they require less paperwork than other types of loans and can be obtained in a shorter amount of time.

Government-backed mortgages

Government-backed mortgages are backed by the federal government, which means they have lower down payment requirements and more lenient credit score requirements than conventional mortgages. This makes them a good option for first-time homebuyers and people with less-than-perfect credit.

There are three main types of government-backed mortgages:

FHA Loans: FHA loans are typically easier to qualify for than conventional mortgages for those with lower credit scores. The minimum score requirement for this loan is 580, and you usually need a minimum down payment of 3.5%. FHA loans can only be used for the buyer’s primary residence.
VA Loans: VA loans are for veterans and active-duty military members. They have no down payment requirement and no maximum loan amount. There’s no minimum requirement for credit score by the federal agency, but many lenders require at least a 660.
USDA Loans: USDA loans are for rural homebuyers. They have no minimum down payment, but you must live in an eligible geographic location to receive this type of loan. Lenders typically look for a credit score of at least 640.

Government-backed mortgages can be a great option for those seeking more flexibility on interest rates, credit score requirements, and down payments. However, some of these options take longer, require extra paperwork and additional insurance, and if you don’t meet the specific eligibility requirements for the type of loan you’re seeking, you may be out of luck.

Fixed-rate mortgages

Fixed-rate mortgages have an interest rate that stays the same for the life of the loan. This means that your monthly payments will be the same every month—no matter what’s going on with the economy and interest rates overall. Fixed-rate mortgages are a good option for people who want to lock in an interest rate and have their monthly payments stay the same.

There are two main types of fixed-rate mortgages:

30-year fixed-rate mortgages: These mortgages have a term of 30 years and a fixed interest rate for the entire term.
15-year fixed-rate mortgages: These mortgages have a term of 15 years and a fixed interest rate for the entire term.

Adjustable-rate mortgages (ARMs)

Adjustable-rate mortgages have an interest rate that can change over time. This means that your monthly payments could go up or down depending on standard interest rates. ARMs typically start with a low introductory interest rate, which makes them attractive for people who want a low monthly payment in the short term. However, ARMs can be risky, as your monthly payments could go up significantly if interest rates go up.

There are two main types of ARMs:

3/1 ARM: This mortgage has a fixed interest rate for the first three years, after which it adjusts annually.
5/1 ARM: This mortgage has a fixed interest rate for the first five years, after which it adjusts annually.

Which type of mortgage is right for you?

The best type of mortgage for you depends on your individual circumstances. If you have good credit and a large down payment, a conventional mortgage might be the best option for you. If you have less-than-perfect credit, a government-backed mortgage might be a better choice. And if you want to know exactly how much your mortgage payments will be each month, a fixed-rate mortgage is the way to go.

No matter what type of mortgage you choose, it's important to shop around and compare rates from different lenders before committing. Once you’ve decided, you should also get pre-approved, which will give you an idea of how much you can borrow and what your interest rate will be.

Buying a home is a big decision, but it's also an exciting one. By taking the time to choose the right mortgage, you can make the process a little bit easier and ensure that you're getting the best possible deal.

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About the author

Suzanne Damon

603-493-5561

Partnering with a real estate agent you can trust, who has the proven experience, knowledge and negotiating skills to succeed, is as priceless as the home you’re buying or selling. With over 30 years of exceeding expectations in residential sales, Suzanne Damon is an unparalleled expert and advisor when it comes to your real estate needs. Suzanne’s extensive experience and proven track record as a buyer and listing agent, investment advisor, property management and marketing specialist have earned her coveted recognition as a leader in the nation. The Wall Street Journal and Barron’s Business Review have ranked her as a top-producing Certified Luxury Home Marketing Specialist for her outstanding level of service, and ability to produce results. Suzanne currently ranks in the top 10% of agents in New Hampshire and heads a talented full-time staff that assists her. The most important measure of success, however, is the reputation she enjoys with her clients, who reward her excellence with ongoing repeat and referral business. Known for her unique attentive approach and “client-first” philosophy, Suzanne embodies all the skills and qualities required of an outstanding real estate professional. The integrity, in-depth market knowledge, marketing savvy, expert negotiating and quality network she brings each client and deal are the hallmarks of how she works. Putting clients first also means being accountable, accessible and responsive. Whether you are buying or selling a home in the Manchester, Bedford, Goffstown, Hooksett, Londonderry, Auburn or Candia areas, Suzanne is at your side protecting your best interest and helping achieve your goals. Prestigious industry affiliations and accomplishments also set Suzanne apart. She is a designated REALTOR member of the Greater Manchester/Nashua Board of REALTORS, a member of the New Hampshire Women’s Council of REALTORS, and recipient of the prestigious ABR, CLMHS, and CRS designations. Suzanne has trained intensively in various facets of real estate, from financing and legal matters to appraisal and taxation. She also founded two thriving organizations: her own brokerage company in Hooksett, NH which she managed and sold to a large franchise, and DAMON HOMES, LLC, managed by her husband and son, which develops raw land for enhancement of the community. Personally, Suzanne has been married to an incredible man for over 32 years, with whom she raised three wonderful children. Their close family spends as much time together as possible and loves to travel when time allows.