A mortgage is a loan you obtain to buy a home. The home is used as collateral until the repayment of the loan. And failure of payments can make the lender take the home away.

Types of mortgage loans:

1. Fixed-rate mortgage loan: Here the rate of interest remains fixed and does not vary with the market rate. It is less risky and more stable. The length of mortgage can be 15- 30 years.

2. Adjustable-rate mortgage (ARM) loan: This offers a fixed rate of interest initially and later moves on to adjustable rates depending upon the interest rates of the markets. It involves risk,
so it is best for short-term deals only.

3. Balloon loans: It is a short-term fixed-rate loan that allows making small monthly installments for an initial period of time. After that period you must pay off the remaining balance with one lump-sum (”balloon”) payment.

4. Home equity mortgage loans: It allows the borrower to draw cash from the equity in the home or a property. It can be either a fixed or an adjustable loan.

5. Government Home Mortgage Loans

a) FHA home mortgage: All qualified buyers looking for moderately priced homes can take advantage of these home mortgage loans. You can apply for this loan even though you’re making a small down payment (usually 3-5 %) towards your home price.

b) VA home mortgage loans: Such loan programs are offered specifically to government employees, service men and women by the US department of Veteran Affairs. VA loans are long-term home mortgage loans with added benefit of zero down payment.

c) Rural housing services (RHS) loan program: It is for rural residents who can apply for it without any down payment.

Your eligibility is based on your gross income, though your monthly payments are made from your net income. So take a careful look at your finances, decide on the type of loan that you will be comfortable with and go ahead in purchasing your dream home.