Unless you are one of the lucky minority who can pay cash for a house, you are going to need a mortgage.

Mortgages have a lot of variations but they can be broken down into two main categories.

1. Conventional mortgage
2. Government mortgage

Each of these categories can be broken down as fixed rate mortgage or adjustable rate mortgage. There are even hybrids of these that have some qualities of both.

Government backed mortgage

The United States government promotes home ownership by backing loans. These fall under the administration of the VA, HUD, or for rural properties the RHS. Beyond this there are numerous state, county and city programs that can help individuals in their communities as well.

These government loans have restrictions and regulate the various aspects of a home loan. Including down payments needed, guidelines for the properties they will lend on, borrower credit requirements and borrower income requirements. There are often fees for being accepted into these programs in exchange for the eased lending requirements.

Conventional mortgage

If your loan does not fall under the category of government mortgage, then it is considered a conventional mortgage. Conventional loans fall into two categories, conforming and non-conforming. Conforming loans are loans that follow the guidelines and conditions of Fannie Mae and Freddie Mac. These are two companies that purchase loans from lenders, package them as securities and sell them to investors.

If your loan is non-conforming then it is possibly a jumbo loan. Which is a loan for an amount that exceeds Fannie Mae and Freddie Mac guidelines. Or your your credit history can make you ineligible for a conforming loan, because of a bankruptcy, foreclosure or a history of  late payments.

With all the options, regulations, restrictions and variations it is easy to get confused about which mortgage program is right for you. That is why a good mortgage broker can be a valuable asset. Someone that understands the programs available and can help find a program that meets your financial needs and goals.

A quick summary of mortgage basics.

1) Conventional loans can be conforming or non-conforming.
2) Government loan programs are administered through the VA, HUD, or RHS

These loans can be fixed rate, adjustable rate or a hybrid that contains elements of both. The search for the best rate begins with understanding which programs are best suited for you. Talk to an expert, they can help point you in the right direction. All the programs have different rates, down payments and credit requirements, you won’t be able to make a realistic budget until you take this first step and decide which mortgage program is right for you.