Buying your first home is one of the biggest financial decisions you may ever make. Between saving for a down payment, figuring out your budget, comparing rates, and learning the language of lending, the process can feel overwhelming before you even start looking at homes.
The good news is that you do not need to know everything at once. A helpful place to begin is understanding the different types of mortgage options available and how each one may fit a different financial situation, lifestyle, or long-term goal.
Mortgage loans can vary by loan term, interest rate type, down payment requirements, credit requirements, and whether the loan is part of a government-backed program.[1] For first-time homebuyers, knowing the basics can help you ask better questions, compare options more confidently, and choose a path that fits your budget.
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Fixed-Rate Mortgages
A fixed-rate mortgage is one of the most common home loan options. With a fixed-rate mortgage, your interest rate stays the same for the life of the loan. That means your monthly principal-and-interest payment stays the same, too, although your total monthly payment can change if costs like property taxes, homeowners insurance, or mortgage insurance change.[1]
This option may be a good fit if you want predictability. If you are buying your first home and plan to stay there for several years, a fixed-rate mortgage can make it easier to budget because you know the principal and interest portion of your payment will not change.
A fixed-rate mortgage may be a good fit if you:
- Want steady, predictable monthly principal and interest payments
- Plan to stay in the home long term
- Prefer stability over short-term flexibility
- Want to build your budget around a consistent payment structure
Fixed-rate mortgages often come in different term lengths, such as 15 years, 30 years, or 40 years. Shorter terms have higher monthly payments but may save money over the life of the loan because you pay interest for less time. Longer terms usually have lower monthly payments but may cost more in total interest over time.[1]
A 40-year fixed-rate mortgage may be a good fit if you:
- Want a fixed payment structure
- Need a lower monthly payment to help with affordability
- Are comfortable with a longer repayment timeline
- Want to compare monthly payment relief against total interest cost
A 30-year fixed-rate mortgage may be a good fit if you:
- Want lower monthly payments
- Need more room in your monthly budget
- Plan to stay in the home long term
- Prefer predictable payments
A 15-year fixed-rate mortgage may be a good fit if you:
- Can comfortably afford a higher monthly payment
- Want to pay off your home faster
- Want to reduce total interest paid over time
- Have strong income and savings
Adjustable-Rate Mortgage (ARM)
An adjustable-rate mortgage, often called an ARM, has an interest rate that can change over time. Most ARMs start with an initial fixed-rate period. During that period, the interest rate does not change. After the initial period ends, the rate can go up or down based on market conditions, which means your monthly principal and interest payment can also increase or decrease.[1]
For example, a 5/1 ARM usually has a fixed interest rate for the first five years. After that, the rate may adjust on a set schedule based on the terms of the loan.
An ARM may be a good fit for buyers who want a lower initial rate and do not expect to stay in the home long term. The Consumer Financial Protection Bureau notes that an ARM may be worth considering if you plan to move before the initial fixed period ends, but it can become more expensive if you stay in the home longer than expected and the rate increases.[1]
An ARM may be a good fit if you:
- Want a lower initial rate
- Plan to move or refinance before the adjustable period begins
- Are comfortable with future payment changes
- Understand the risks if the rate increases later
Community Heroes Mortgage Program
Sun East’s Community Heroes Mortgage Program is designed for eligible community-serving professionals, including workers in health and wellness, the armed services, public safety, and education. For first-time homebuyers who qualify, this type of program may help make homeownership feel more within reach. Here’s how:
- Receive a 0.25% discount¹ off the approved loan rate.
- Borrow up to a 95% Loan-to-Value (LTV) ratio for those with a FICO score of 660 or higher.
- Eligible for up to 6% seller’s assistance.
- 100% of gift funds from family members can be used for the down payment or reserves.
A Community Heroes Mortgage may be a good fit if you:
- Work in an eligible community-serving profession
- Are buying your first home
- Want to explore whether your career may qualify you for mortgage savings
- Are looking for a conventional loan option with added support
Medical Professional Mortgage
Some buyers have strong long-term earning potential but may face unique financial challenges early in their careers. This can be especially true for medical professionals who recently completed school or training and may have student debt, limited savings, or a shorter employment history.
Sun East’s Medical Professional Mortgage is designed for qualifying medical professionals and may help eligible buyers explore home financing options that better fit their career path and financial profile.
A Medical Professional Mortgage may be a good fit if you:
- Are a qualifying medical professional
- Have strong income potential but unique financial circumstances
- Want to explore a no-money-down mortgage option
- Want to understand options that may not require private mortgage insurance
FHA Mortgage
An FHA mortgage is insured by the Federal Housing Administration, which is part of the U.S. Department of Housing and Urban Development. FHA insurance helps protect approved lenders if a borrower defaults on the loan.[4]
FHA loans are often discussed in the first-time homebuyer space because they may offer more flexible qualifying standards than conventional loans. HUD notes that FHA loans can offer low down payments, low closing costs, and easier credit qualifying. For buyers purchasing their first home, HUD states that the down payment can be as low as 3.5% of the purchase price.[5]
The tradeoff is that FHA loans include mortgage insurance. The Consumer Financial Protection Bureau notes that FHA mortgage insurance is required for all FHA loans and includes both an upfront cost and a monthly cost.[3]
An FHA mortgage may be a good fit if you:
- Are a first-time homebuyer
- Need more flexibility with credit or down payment requirements
- Have savings for upfront costs but may not have a large down payment
- Understand that mortgage insurance will add to the cost of the loan
VA Mortgage
A VA-backed purchase loan is available to eligible veterans, service members, and certain surviving spouses. The U.S. Department of Veterans Affairs says a VA-backed purchase loan can help eligible buyers purchase, build, or improve a home, especially if they do not want to make a down payment.[6]
VA-backed purchase loans often offer no down payment as long as the sales price is not higher than the home’s appraised value. They also do not require private mortgage insurance or mortgage insurance premiums.[6]
However, VA loans may include a VA funding fee, along with interest and closing costs. The VA explains that this one-time fee helps lower the cost of the program for taxpayers because the program does not require down payments or monthly mortgage insurance.[6]
A VA mortgage may be a good fit if you:
- Are an eligible veteran, active-duty service member, or surviving spouse
- Want to explore a no-down-payment option
- Want to avoid monthly mortgage insurance
- Plan to live in the home as your primary residence
USDA Mortgage
A USDA mortgage may help eligible low- and moderate-income buyers purchase a home in an eligible rural area. The U.S. Department of Agriculture’s Single Family Housing Guaranteed Loan Program allows eligible applicants to purchase, build, rehabilitate, improve, or relocate a home in an eligible rural area with 100% financing.[7]
This type of loan may be especially helpful for buyers who have steady income but limited savings for a down payment. USDA states that eligible applicants must meet income requirements, agree to personally occupy the home as their primary residence, and purchase in an eligible rural area.[7]
USDA loans may still include upfront and ongoing costs. The Consumer Financial Protection Bureau notes that USDA loans require mortgage insurance, which can be paid at closing and as part of the monthly payment.[3]
A USDA mortgage may be a good fit if you:
- Are looking to buy in an eligible rural area
- Meet income and property eligibility requirements
- Have limited down payment savings
- Plan to live in the home as your primary residence
How to Choose the Right Mortgage Type
There is no single mortgage that is right for every first-time homebuyer. The right option depends on your budget, income, savings, credit, career, location, and how long you plan to stay in the home.
As you compare mortgage types, ask yourself:
- Do I want the stability of a fixed payment?
- Would I consider an adjustable rate if I plan to move or refinance later?
- How much do I have saved for a down payment and closing costs?
- Am I eligible for FHA, VA, USDA, or another special program?
- Do I understand how mortgage insurance may affect my monthly payment?
- Do I want a lower monthly payment, or do I want to pay the loan off faster?
- How long do I realistically plan to stay in the home?
HUD recommends that homebuyers start by figuring out what they can afford, which depends on income, credit rating, current monthly expenses, down payment, and interest rate.[9] Talking with a mortgage specialist can help you compare your options, understand the tradeoffs, and decide which mortgage may fit your first home.
The Bottom Line
Your mortgage is more than a loan. It is the financial structure that helps support your homeownership journey.
For some first-time homebuyers, a fixed-rate mortgage may offer the stability they need. For others, an ARM may provide short-term flexibility. FHA, VA, or USDA loans may help eligible buyers overcome certain barriers to homeownership. Special programs may also make sense for buyers in specific careers or financial situations.
The best mortgage type is the one that fits your budget, your goals, and your long-term plans.
Sun East is here to help you understand your options, compare what may work for your situation, and take your next step toward homeownership with confidence. Speak with one of our mortgage specialists and learn more about which mortgage is best for you!
Sources
- Consumer Financial Protection Bureau: Understand the Different Kinds of Loans Available
https://www.consumerfinance.gov/owning-a-home/explore/understand-the-different-kinds-of-loans-available/ - Consumer Financial Protection Bureau: Conventional Loans
https://www.consumerfinance.gov/owning-a-home/conventional-loans/ - Consumer Financial Protection Bureau: What Is Mortgage Insurance and How Does It Work?
https://www.consumerfinance.gov/ask-cfpb/what-is-mortgage-insurance-and-how-does-it-work-en-1953/ - Consumer Financial Protection Bureau: What Is an FHA Loan?
https://www.consumerfinance.gov/ask-cfpb/what-is-an-fha-loan-en-112/ - U.S. Department of Housing and Urban Development: Let FHA Loans Help You
https://www.hud.gov/helping-americans/loans - U.S. Department of Veterans Affairs: VA-Backed Purchase Loan
https://www.va.gov/housing-assistance/home-loans/loan-types/purchase-loan/ - USDA Rural Development: Single Family Housing Guaranteed Loan Program
https://www.rd.usda.gov/programs-services/single-family-housing-programs/single-family-housing-guaranteed-loan-program - Consumer Financial Protection Bureau: Special Loan Programs
https://www.consumerfinance.gov/owning-a-home/special-loan-programs/ - U.S. Department of Housing and Urban Development: Buying a Home
https://www.hud.gov/helping-americans/buying-a-home