Paying cash for a new home is not a viable option for most prospective homebuyers. Instead, the majority of homebuyers apply for mortgages to finance the purchase. Private equity principal Mark Hauser explains that mortgages are not “one-size fits all.” There are many considerations that need to be considered when picking the right mortgage for your home-buying plans.

Types of Residential Mortgages

Before picking the right mortgage, it helps to understand the options. Here are the types of residential mortgages that can work with your plans:

Conventional Mortgage Loan

The conventional mortgage loan can be activated to buy a primary residence or an investment property. It helps to have a good credit score. Financial advisor Mark Hauser notes prospective applicants need a FICO score of at least 620 and a down payment of 20 percent. If the downpayment for a conventional loan is less than 20 percent, there might be a requirement to set up a private mortgage insurance policy.

Jumbo Mortgage Loan

A jumbo mortgage loan works best for buyers with a FICO credit score of about 700. The applicant must also provide documentation proving a substantial amount of savings or assets. Mark Hauser explains that these loans work best for higher-priced properties.

Fixed-Rate Mortgage Loan

A fixed-rate mortgage loan is just that: a fixed rate. That means you will pay the same amount each month for the loan duration. That could be anywhere between 15 to 30 years. This is a good option for someone who might not want to stay in a home for long. However, this type of loan comes with higher rates and a provision for the homebuyer to refinance if interest rates drop.

Adjustable-Rate Mortgage Loan

The adjustable-rate mortgage will fluctuate depending on the rise and falls of market conditions. Although it might start at a reasonable rate, that number can go up and put the homebuyer at risk of defaulting if they can’t make the new higher payments.

Government-Insurance Mortgage Loan

A homebuyer with low credit scores and small down payment funds could get support with a government-insured mortgage. These loans are offered by the Federal Housing Administration, the U.S. Department of Veterans Affairs, or the U.S. Department of Agriculture. These loans are a good option for first-time buyers.

Getting pre-approved for any of these loans will put you in a stronger buying position as you begin your home search.