After the housing crash in 2008, the real estate market left risky loan programs behind and instead turned to safer ways to finance homes. Although there are fewer options, there are still many things to consider before choosing a program that’s right for your situation. Don Frommeyer, CRMS, president of the National Association of Mortgage Brokers (NAMB) weighs in on the differences among mortgage loan programs.

“Although there are less options to choose from, mortgage loan programs are safer and more sensible than they were a few years back,” says Frommeyer. “When you go to a mortgage broker, they should be able to pinpoint what will be best for your situation. There are advantages and disadvantages to each type of loan depending on the circumstances.”

Below is a breakdown of three types of loan programs borrowers often come across:

Fixed Rate: A Fixed Rate Mortgage allows borrowers to pay an equal monthly payment for the duration of the loan, which is typically 15 or 30 years. The interest rate stays the same during the life of the loan, but during the first few years only a very small portion actually pays off the principal. Loan payments are typically higher as is the interest rate, but homeowners can refinance if interest rates go down. Fixed rate mortgages are typically recommended for homebuyers who plan on staying in their house for more than ten years.

Adjustable Rate: An Adjustable Rate Mortgage (ARM) is more flexible than the fixed rate loan because it changes along with changes in interest rates every year. The monthly payments are initially lower and may go down if interest rates improve, however there is more risk involved with ARMs. There are also hybrid options that include an initial period of fixed rate followed by an annually adjusted rate.

First Time Buyer: First time-buyer programs allow for a lower down payment and easier qualification process, and often times have lower rates. However, these types of loans may require education courses and may be subject to income and property value limitations.

For more information, visit www.namb.org