A mortgage is when you take a loan from any lender and pay back the loan amount along with a rate of interest. The rate of interest typically serves as collateral, however, in some cases lenders may ask for other collaterals for the time the borrower pays back the loan amount along with the rate of interest. Mortgage is mostly associated with purchase of property and has become known as a the generic term for a loan secured by such real property.

Mortgages have an interest rate and are scheduled to amortize over a set period of time. The typical period of amortization is 30 years.

Following are the major types of mortgages that you can opt for. It should be noted that different types of mortgages suit different situations best.

Fixed Rate Mortgages - When you take a fixed rate mortgage, you need to pay a fixed rate of interest throughout the tenure of the mortgage. This is the most common type of mortgage.
 
Adjustable Rate Mortgage (ARM) - By opting for an ARM, your payable rate of interest is not fixed but variable. ARM typically starts with an initial rate of 5%, which may rise to 7% the next year or even 9% the 3rd year. How much interest you pay also changes accordingly based on the remaining principal balance for the remaining term at the new interest rate.

Shorter Term Fixed Loan - A shorter term fixed loan has a fixed rate of interest and payments. This rate is calculated on the basis of an amortization of 30 years. You should know that term fixed loans can be converted to an adjustable loan after a period of 3, 5, 7 or 10 years depending on the mortgage program decided.

You can opt for a shorter-term fixed loan if you are planning to sell off or refinance your home during the fixed rate period of the loan. However, it will make sense only if the loan contains no prepayment penalty.

Various Types of Mortgage Programs - Conventional Mortgages are based on the following features:

Set period of Monthly Payments: The monthly payments remains fixed throughout the tenure
A fixed Interest Rate: The interest rate never changes throughout the term of the loan
A fixed Loan Term or Tenure: This typically ranges between 15 and 30 years
Self-Amortization: The loan is paid off at the end of the specified term

VA (Veterans Administration) Loans- This loan can be availed only by Veterans and is backed by the government of the United States. Some of the features of Veteran’s administration loans are:
No down payment: No down payment is required for veterans applying for the loan
Low interest rates:  rate of interest is the lowest when compared to the prevailing rates.

A VA loan requires an up front funding fee (FF). This is a one-time charge which can be rolled into the mortgage amount.