What is the difference between a 30-year and 15-year mortgage?

A 30-year mortgage has lower monthly payments but you pay more total interest over the life of the loan. A 15-year mortgage has higher monthly payments but significantly less total interest and you build equity faster. For example, on a $300,000 loan at 7%, the 30-year payment is about $1,996/month (total interest: $418,527) versus $2,696/month for 15-year (total interest: $185,367).

How much down payment do I need for a house?

The minimum down payment depends on the loan type: FHA loans require 3.5% (with credit score 580+), conventional loans can go as low as 3% (Fannie Mae HomeReady or Freddie Mac Home Possible), VA loans and USDA loans offer 0% down for eligible borrowers. However, putting down 20% or more avoids PMI (Private Mortgage Insurance) which saves money monthly.

What is PMI and how can I avoid it?

PMI (Private Mortgage Insurance) is required on conventional loans when your down payment is less than 20%. It typically costs 0.5% to 1.5% of the loan amount per year. You can avoid PMI by: putting 20% down, using a VA or USDA loan, choosing lender-paid PMI (higher rate), or requesting PMI removal once you reach 20% equity. PMI automatically cancels at 22% equity.

Should I choose a fixed-rate or adjustable-rate mortgage (ARM)?

A fixed-rate mortgage keeps the same interest rate for the entire loan term, providing payment stability. An ARM (like a 5/1 ARM) offers a lower initial rate for a set period (5 years), then adjusts annually based on market rates. Choose fixed-rate if you plan to stay long-term and want predictability. An ARM can save money if you plan to sell or refinance within the initial fixed period.

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Mortgage Types Explained

30-Year Fixed

Most popular option. Fixed rate for 30 years, lowest monthly payment but more interest over time.

15-Year Fixed

Higher monthly payment but you'll save tens of thousands in interest and own your home faster.

ARM (Adjustable Rate)

5/1 ARM means fixed rate for 5 years, then adjusts annually. Good if you plan to move before adjustment.

FHA Loan

Government-backed, allows 3.5% down and lower credit scores. Requires mortgage insurance (MIP).

VA Loan

For veterans and active military. No down payment, no PMI. Best deal if you qualify.

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