Which is the Right Mortgage for You: Understand Your Options
August 6, 2025
Navigating the mortgage landscape can be stressful—even more so when interest rates are high. Taking out a long-term loan is a big financial choice. With many options available, it’s easy to feel confused. But having a solid understanding of the different types of mortgages can empower you to choose a loan that fits your financial situation and goals.
Once you know if you are ready to buy a home and how much you can borrow, it’s time to look at important choices. You need to decide on a mortgage and a lender.
Fixed-Rate vs. Adjustable-Rate Mortgage
What’s the difference?
A fixed-rate mortgage keeps the same interest rate for the entire duration of the loan. That means your monthly principal and interest payments will never change, making it easier to plan your budget.
An adjustable-rate mortgage (ARM), on the other hand, has an interest rate that can change over time. The loan usually starts with a fixed interest rate for a set number of years, like 5, 7, or 10. After that, the rate changes regularly, often once a year, based on market conditions.
Why it matters:
ARMs usually have a lower interest rate than fixed-rate mortgages. This can make them appealing if you want to lower your initial costs. However, once the fixed-rate period ends, your payments could increase significantly. A fixed-rate loan offers stability but might start with a higher monthly payment.
Which is right for you?
If you plan to stay in the home long-term or expect interest rates to rise, a fixed-rate mortgage could offer more security. If you expect to move or refinance within a few years, an ARM might help you save in the short term—just be sure you understand the risks.
15-Year vs. 30-Year Mortgage
What’s the difference?
This refers to the length of time you'll be repaying the loan. A 15-year mortgage has higher monthly payments but allows you to pay off the loan faster and pay less interest over time. A 30-year mortgage spreads payments out over a longer period, making each monthly payment lower, but increases the total interest paid.
Why it matters:
Choosing a shorter loan term could save you tens of thousands of dollars in interest, but you need to make sure the higher payments fit comfortably within your budget. A longer term provides more flexibility in your monthly finances.
Which is right for you?
If your income allows you to comfortably handle the higher payments, a 15-year loan could be a smart move. However, many homeowners opt for 30-year loans to keep monthly costs manageable and retain flexibility in their cash flow.
Conforming vs. Jumbo Loans
What’s the difference?
A conforming loan meets specific requirements set by federal entities like Fannie Mae and Freddie Mac, including limits on how much you can borrow. In 2025, the limit for a conforming loan in most areas is $804,500, but this amount may be higher in high-cost regions. Loans that exceed this limit are considered "jumbo" loans.
Why it matters:
Conforming loans often come with lower interest rates and easier qualification standards. Jumbo loans can carry higher rates and may require larger down payments, higher credit scores, or lower debt-to-income ratios.
Which is right for you?
It depends on the home price and what you qualify for. Regardless of loan size, don’t stretch your finances too thin—mortgage payments are just one part of the total cost of homeownership.
Private Mortgage Insurance (PMI) vs. Piggyback Loans
What’s the difference?
If you’re unable to put down 20%, you’ll likely need to either pay for private mortgage insurance (PMI) or use a piggyback loan. PMI is an added monthly fee that protects your lender if you default. Piggyback loans involve taking out a second mortgage alongside your primary one to reach the 20% threshold and avoid PMI.
Why it matters:
PMI increases your monthly costs, but it can usually be canceled once you reach 20% equity in the home. Piggyback loans may be tax-deductible but can come with higher interest rates and added complexity.
Which is right for you?
Consider how long you’d be paying PMI and whether you qualify for a piggyback loan. Your decision will depend on the total cost of borrowing, your credit profile, and how long you plan to stay in the home.
FHA Loans
What’s the difference?
FHA loans are backed by the Federal Housing Administration and are aimed at helping first-time homebuyers or those with less-than-perfect credit. They allow for down payments as low as 3.5%.
Why it matters:
These loans can help more people buy homes. However, they require mortgage insurance premiums that may last for the entire loan.
Which is right for you?
If you're having trouble qualifying for a conventional loan, an FHA mortgage might be the stepping stone to get you into a home.
VA Loans
What’s the difference?
VA loans are designed for veterans, active-duty service members, and certain surviving spouses. These loans are backed by the Department of Veterans Affairs and offer some unique benefits.
Why it matters:
With no required down payment and no PMI, VA loans can be a highly affordable way to buy a home. However, borrowers must typically pay a funding fee and meet eligibility requirements.
Which is right for you?
If you're eligible, a VA loan is often worth exploring. Even if you qualify for a conventional loan, compare the terms—VA loans can offer competitive rates with fewer upfront costs.
Final Thoughts: Educate Before You Commit
When it comes to choosing a mortgage, one size does not fit all. Consider your income, long-term plans, risk tolerance, and cash flow when weighing your options. Taking the time to compare loan types, rates, and terms can help you secure a mortgage that supports—not strains—your financial future.
Understanding the trade-offs of each loan type puts you in control. With a clear picture of your goals and a smart strategy in place, you’ll be well-prepared to make one of the biggest financial decisions of your life.
Sources:
https://www.fidelity.com/viewpoints/personal-finance/picking-mortgage
Disclosure:
This information is an overview and should not be considered as specific guidance or recommendations for any individual or business.
This material is provided as a courtesy and for educational purposes only.
These are the views of the author, not the named Representative or Advisory Services Network, LLC, and should not be construed as investment advice. Neither the named Representative nor Advisory Services Network, LLC gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your Financial Advisor for further information.