The two most common types of mortgages are fixed rate and adjustable rate. There are several others, some of which are described below, but it's best to keep it simple as you enter the labyrinthine maze of Home finance.

Fixed rate

These loans offer one specific rate for its entire duration; however, if interest rates fall, your rate may increase.

Adjustable rate mortgage (ARM)

Adjustable rate mortgages main attraction is their relatively low initial interest rate; however, they are directly impacted by the market conditions at adjustment time. So, your monthly payment can fluctuate, up or down, dramatically over time.

Hybrid ARM

A hybrid ARM is a blending of these first two mortgages in which the interest rate starts out fixed, but after a specified length of time, becomes vulnerable to the whims of the market.

FHA (Federal Housing Administration)

This is a government-secured loan that allows people who may have trouble qualifying for other financing a home loan with one low down payment; however, the size of the loan could be limited.

VA (Veterans Administration)

Here we have another government-backed loan; this one offers eligible veterans, active duty personnel and surviving spouses competitive interest rates, with little to no down payments.

Balloon mortgage

Similar to the aforementioned hybrid ARM, a balloon mortgage starts with a fixed rate, usually at a comparatively low number. Once the fixed period ends, the lender must pay back the full balance of the loan.

Interest-only

Another hybrid of sorts, interest-only loans allow the borrower to pay just the interest for an agreed-upon term, after which the full balance of the loan is due.

Reverse mortgage

This one is aimed at senior citizens who want to convert their home equity into cash. The crucial distinction between reverse and conventional mortgages is that with a reverse mortgage, lenders are not required to pay principal or interest as long as they live in or own the home.