Shopping for a mortgage can be quite confusing — there are many options to choose from. And, when it comes to a big-ticket purchase such as a home, you’ll want to know as much as you can to make an informed decision, which will hopefully keep more money in your bank account in the long run.

The two main types of mortgages for the majority of homebuyers are fixed-rate mortgages and adjustable-rate mortgages (ARMs).

A fixed-rate mortgage is the straightforward home loan that carries an interest rate for the life of the mortgage, usually 15, 20 or 30 years. An adjustable-rate mortgage will have an interest rate that fluctuates to reflect the current market rates — some ARMs have an initial fixed-rate period before the rate becomes variable.

Choosing between these two types of mortgages often comes down to a decision about where you believe interest rates will travel in the future. If you expect borrowing rates to rise in the future, you might consider a fixed-rate mortgage to ensure a lower rate. If you expect rates to fall but you have to buy a home now, you might opt for the ARM.

Riskier mortgages include balloon and interest-only mortgages. Balloon mortgages are typically a fixed-rate option that calls for relatively small payments for a fixed period of time, after which the remaining balance of the mortgage is due in full. Interest-only mortgages are like balloon mortgages, except that you are only paying interest for that fixed period of time. These types of mortgages may leave unprepared borrowers with a hefty final payment.

Other home loans available only to certain consumers include Federal Housing Administration-insured loans (FHA loans) and VA loans. FHA loans are a form of federal assistance for lower-income Americans to purchase a home, but the size of the loan tend to be smaller — which likely means a smaller home purchase. VA loans are guaranteed by the U.S. Department of Veteran Affairs and they are primarily for eligible veterans, active duty personnel and their spouses. VA loans tend to offer better rates and lenient down-payment requirements. Like FHA loans, VA loans may be smaller in size.

There are many options for the prospective homebuyer to consider. Taking the time to research more about each type of mortgage, and how they can work for your particular case, will reduce the costs of obtaining your next home.

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