Understanding Mortgage Loans: What Are The Differences Between Each Loan Type

Jacques Poujade
5 min readNov 9, 2018


LendPlus is one of the leading alternative-lending companies offering mortgage loan options. It continually astounds me how many people we help every day. Families see their dreams come true with the help of my 30 years of experience along with my highly-trained team. We help them get the financing they need to buy their dream homes or start their dream real-estate side business.

Even with a world-class lending company at your service, it can be tough to know the difference between the many mortgage loan options available. How do you figure out which one is right for you? I’ve put together a handy guide to showcase each loan and help you sift through the real estate jargon.

30 Year Fixed Rate Mortgage

This is the most traditional loan and odds are when people talk about mortgages, they are usually referring to the 30 year fixed rate mortgage loan. What makes this loan so attractive to so many people is the time it gives you with an amortization schedule allowing you 30 years to pay off the loan with an agreed upon fixed rate for the duration of the loan.

With this kind of time, you have the ability to buy your dream home with a smaller mortgage payment, allowing you to enjoy life without the stress of worrying about your mortgage. Usually, this type of loan also allows you to pay around 20% additional equity per year if you decide you want to try to pay it off faster. Make sure this option is included in the loan document before you sign. LendPlus always advises having this clause included.

To secure a 30 year fixed rate mortgage, you must have a down payment of at least 3% or more depending on the lender. Most lenders will require at least a 600 credit score and your debt-to-income ratio should be around 43%, which usually includes your new mortgage.

Adjustable-Rate Mortgage

An adjustable-rate mortgage is exactly as it sounds. It is a mortgage that starts out with a very low-interest rate and adjusts to a higher interest rate as the interest grows.

There are a few situations that this would work in one’s favor. Some families need to start off low interest for a lower mortgage payment so that they can have time to save up and prepare for a higher interest later. This is usually due to a temporary financial difficulty like a layoff or a new addition to the family. This is also a popular mortgage option for people who don’t plan to stay in the home for very long like a house flipper or real estate investor.

It is a bit of a risky loan as the fluctuation of the mortgage payment after the initial interest rate changes can make it hard to know how to budget. This is why it should only be a temporary option. In order to qualify for this loan, the down payment starts a little higher at 5% but can go up to 20% with certain lenders. All other requirements would be the same with a credit rating of at least 600 if not more and a debt-to-income ratio around 43%.

FHA Loan

This loan is done through the Federal Housing Administration and operates under the Department of Housing and Urban Development (HUD). This is a perfect loan for a first time home buyer. It was actually introduced to make the option of buying a home available to people who would not normally be able to afford a home.

Because of the unique attributes of this loan, they require a 3.5% down payment that is not from savings or any kind of assets. It must be a gift from a relative, non-profit organization, or a government agency.

The best thing about this loan is that it is easier to qualify for because credit rating and debt to income ratio are not as strictly monitored. You must be able to show enough income to pay the low mortgage rate with a lower fixed interest rate. It is a great option for families just starting out.


This is a pretty exciting loan. A JUMBO loan is a non-conforming loan for higher priced housing via a private lender. This is where some big bucks are exchanged. If you want to buy an expensive mansion, this is most likely the loan you want to go for. Since these are offered through private lending, they can make their own rules and their own qualifications. The sky is the limit with these loans.

It is not easy to qualify, though. Your credit score will at least need to be in the 700s and you will have to show a very high income that is within a good ratio of the price of the house. These are going to be pretty big mortgage payments. The debt-to-income ratio should again be within 43% after your mortgage is added in.

If you are looking for a JUMBO loan, you know you have made it.

Reverse Mortgage

A reverse mortgage is a great way to get some extra cash to help with any unforeseen circumstances or things like renovations, paying for a family member’s college or anything else that might require equity. This is another federally-insured HUD loan that helps lenders take out money against the equity of their home.

You won’t be required to repay the loan until you are no longer using the home as a primary residence. To qualify, you must be 62 years of age, own your home or have very little left on your mortgage, and use the home as a primary residence. The great thing is that you do not have to have bought the home through a HUD program. As long as you meet those three requirements, a reverse mortgage is available to you.

Buying a house is one of the most stressful things a person will do in their life. It is good to know that there is a wide variety of loans to help ease this stress. With these mortgage loan options, there is definitely something for everybody. My team at LendPlus will help you find the right choice for you. If you are interested in exploring your mortgage options, contact us today!