When you’re looking to buy a home in Des Moines, Iowa, understanding the types of mortgages becomes critical. The right mortgage aligns with your finances, time horizon, and goals. This blog breaks down the major categories you’ll encounter, explains how each works, and highlights details you’ll want to compare when evaluating offers.
Each section covers one form of home loan and explains its structure, who it serves, what sets it apart, and what to watch for. By the end, you’ll have a clearer view of your options.
Fixed-Rate Mortgage
A fixed-rate mortgage locks in one interest rate for the entire loan term, often 15 or 30 years. Your monthly payment for principal and interest remains constant. That means you can budget accurately over the whole duration of your loan. In a market like Des Moines, where property values and taxes may change, knowing the rate won’t adjust gives a layer of certainty.
When you use this type of mortgage, you’re choosing stability. If you plan to keep your home long term and like predictability, a fixed-rate loan often fits. You’ll still need to consider property tax changes and insurance costs. The extended amortization can mean paying more interest over time compared to some shorter-term options. But for many borrowers, the clarity of a fixed payment is valuable.
When you use this type of mortgage, you’re choosing stability. If you plan to keep your home long term and like predictability, a fixed-rate loan often fits. You’ll still need to consider property tax changes and insurance costs. The extended amortization can mean paying more interest over time compared to some shorter-term options. But for many borrowers, the clarity of a fixed payment is valuable.
Adjustable-Rate Mortgage (ARM)
An adjustable-rate mortgage starts with a lower rate for a defined period (say five years) and then shifts to a rate that changes at regular intervals, based on an index plus margin. After the initial fixed period, the payment may vary. Because that rate can go up or down, your monthly cost may change. An ARM might make sense for home buyers in Des Moines who move within a few years or anticipate higher income later.
This type of mortgage demands attention to terms. You’ll want to check the initial fixed period, the adjustment frequency, how high the rate can go (the cap), and what triggers recalculation. While the initial cost might be lower than a fixed-rate option, the long-term risk is higher due to payment uncertainty. Using an ARM means accepting that change is built into the loan.
This type of mortgage demands attention to terms. You’ll want to check the initial fixed period, the adjustment frequency, how high the rate can go (the cap), and what triggers recalculation. While the initial cost might be lower than a fixed-rate option, the long-term risk is higher due to payment uncertainty. Using an ARM means accepting that change is built into the loan.
Government-Backed Mortgages (FHA, VA, USDA)
Government-backed loans include mortgages insured or guaranteed by federal agencies—such as the Federal Housing Administration (FHA), Department of Veterans Affairs (VA), or United States Department of Agriculture (USDA). These loan types often permit lower down payments or more flexible credit requirements.
Each program has its own criteria. FHA loans require mortgage insurance premiums. VA loans typically require no down payment for eligible veterans. USDA loans target properties in designated rural or semi-rural areas and may provide 100 percent financing. These types of mortgages expand access and include program-specific rules and costs you’ll need to assess.
Each program has its own criteria. FHA loans require mortgage insurance premiums. VA loans typically require no down payment for eligible veterans. USDA loans target properties in designated rural or semi-rural areas and may provide 100 percent financing. These types of mortgages expand access and include program-specific rules and costs you’ll need to assess.
Jumbo Mortgages
A jumbo mortgage finances exceed the conforming loan limit set by the Federal Housing Finance Agency (FHFA). Because Des Moines generally falls into a moderate-price area, many buyers may not need jumbo loans. However, a jumbo mortgage becomes relevant if you’re purchasing high-end property that exceeds local conforming thresholds. These loans often carry stricter credit standards, larger down payment expectations, and higher interest rates.
When you apply for a jumbo loan, you’ll face elevated scrutiny on income documentation, debt-to-income ratio, assets, and reserves. The lender sees a higher risk due to the larger loan size. If your home-purchase amount is modest, a standard conforming loan may suffice. But for property above typical limits, a jumbo mortgage is one of the major types of mortgages that will apply.
When you apply for a jumbo loan, you’ll face elevated scrutiny on income documentation, debt-to-income ratio, assets, and reserves. The lender sees a higher risk due to the larger loan size. If your home-purchase amount is modest, a standard conforming loan may suffice. But for property above typical limits, a jumbo mortgage is one of the major types of mortgages that will apply.
Interest-Only and Payment-Option Mortgages
Some loan products allow you to pay only interest for a set period, or choose between payment options such as minimum payment, interest only, or full amortization. In these cases, your principal may not decline for years; in some cases, your balance may increase. These are less common in today’s market, especially after stricter regulations were introduced following the housing crisis.
Using an interest-only or payment-option mortgage requires careful attention. The appeal may lie in a lower initial payment for a home purchase in a market like Des Moines, but the risk includes payment increases later and potential negative amortization. Such products fall under the broad umbrella of types of mortgages and highlight how not all home loans follow the standard amortization model.
Using an interest-only or payment-option mortgage requires careful attention. The appeal may lie in a lower initial payment for a home purchase in a market like Des Moines, but the risk includes payment increases later and potential negative amortization. Such products fall under the broad umbrella of types of mortgages and highlight how not all home loans follow the standard amortization model.
Reverse Mortgage
A reverse mortgage is available to homeowners who meet age or equity criteria. Instead of monthly payments incoming from the lender, the lender makes payments to the homeowner (or allows access to a line of credit), and the loan balance grows over time until repayment is triggered by the sale of the home or move out. Although more common in retirement-planning contexts, the product exists in the marketplace.
If you own a home in Des Moines and have accumulated substantial equity, a reverse mortgage might be one of the options you encounter. It works differently from traditional loans because you don’t make regular payments; your equity backs the arrangement until the home is sold or you exit.
If you own a home in Des Moines and have accumulated substantial equity, a reverse mortgage might be one of the options you encounter. It works differently from traditional loans because you don’t make regular payments; your equity backs the arrangement until the home is sold or you exit.
FHA 203(k) and Home Renovation Loans
An FHA 203(k) loan combines home purchase financing with repair or renovation funding. It allows you to finance the cost of home improvements into the mortgage at closing rather than taking out a separate loan. In Des Moines, you might find older homes that need updates, and this style of loan enables you to buy and renovate in one package.
The structure requires the lender to approve the renovation plan and hold funds in escrow for work to be completed. You’ll make payments on the full mortgage amount (including the purchase price and renovation budget) over the term. This form is one of the distinct types of mortgages because it addresses repair and improvement needs as part of the financing rather than afterward.
The structure requires the lender to approve the renovation plan and hold funds in escrow for work to be completed. You’ll make payments on the full mortgage amount (including the purchase price and renovation budget) over the term. This form is one of the distinct types of mortgages because it addresses repair and improvement needs as part of the financing rather than afterward.
Balloon Payment Mortgage
A balloon payment mortgage sets low initial payments with the expectation that the remaining balance becomes due in a lump sum at the end of the term. For example ,you might have a 7-year term that amortizes as if over 30 years, but you must repay the full balance at the end of year seven.
Although less common in today’s residential market, this product still exists in particular circumstances. The advantage is lower initial payments. The disadvantage is the balloon event, requiring refinancing or sale. This illustrates how the menu of types of mortgages includes some options that carry significant future repayment risk.
Although less common in today’s residential market, this product still exists in particular circumstances. The advantage is lower initial payments. The disadvantage is the balloon event, requiring refinancing or sale. This illustrates how the menu of types of mortgages includes some options that carry significant future repayment risk.
Navigate Home-Buying with Megan Mitchum + Co.
If you’re preparing to buy or refinance and want expert guidance through your options, Megan Mitchum + Co. can help. With deep experience in Des Moines real estate and a strong grasp of how mortgage products fit into each transaction, Megan and her team will guide you toward choices that make financial sense.
Interested in Des Moines real estate? Contact us today and we’ll be happy to help you find your dream Des Moines home!
Interested in Des Moines real estate? Contact us today and we’ll be happy to help you find your dream Des Moines home!
