The Three Main Types of Mortgages Author: Apu Hypallathek For many, the American dream begins and ends with the purchase of their very first home. But, unless your name is "Trump" or "Gates," you will most likely not be able to put down all the money required to purchase your first home. So, you will need to get a home loan - or mortgage - in order to move into your dream home. But getting a home mortgage can be a daunting task. So what is a mortgage? Basically, it is an agreement between you and a lending institution that says you will repay your loan at a certain interest rate over a certain number of years. The mortgage will be secured against loss with your new home, so if you default, the lending institution will take ownership of the home. Home loans in America attract different interest rates according to the institution you lend from, but you will find that they are generally lower than a standard personal loan or credit card offered by the same institution. The bank or lender can usually afford to offer an amount of interest lower on home loans because of the extended period of years in which you will be paying interest, as opposed to a personal loan or credit card which is usually paid off in a shorter amount of time. Loan repayments on mortgages are usually paid fortnightly or monthly and have a term of around 25-30 years. There are two major types of home loans in America now, with a third type becoming more popular in recent years. The first type of loan is the fixed home loan which allows you to borrow the money at a specified or fixed rate of interest for a specific numbers of years. Many borrowers sign up for this loan because in doing so they avoid the risk of having to incur extra expenses if home loan interest rates should fluctuate. The second type of loan is the variable home loan which has a variable or changing rate of interest. Should the Reserve Bank determine that interest rates will move up or down in a particular quarter, then your lender has the freedom to also do so accordingly. If the rates are heading downwards it is ideal for borrowers. But should they begin to trend upwards this can spell danger for many people who live on a tight budget and already struggle to make their monthly repayments. Lately, there has been a new type of mortgage that has been gaining popularity. Called a "low doc" or bad credit loan, these types of mortgages usually come with higher fees and higher interest rates to offset the additional risk to the lender who is working with those with bad credit. But for many, these low doc mortgages are the only way people with poor credit or low incomes can get into the home of their dreams. But, no matter what your credit history, there is a home mortgage out there that will fit your needs. You just need to do your research, practice a little patience, and you will soon be pulling the "For Sale" sign out of the lawn of your new home! About the Author: Apu Hypallathek is the owner and operator of Use Mortgage, a leading Internet portal for mortgage information. For more mortgage information and resources, please stop by: http://www.usemortgage.com.