Conventional Mortgages

• Conventional mortgage is a flexible term. Most often it refers to home loans that have fixed interest rates, fixed terms and standard principal and interest amortization schedules. In some cases it can also include adjustable-rate mortgages, but most often conventional mortgages are just that: traditional principal and interest loans. If you take out a conventional mortgage, you'll know how much your payment will be each month and when the loan will expire.
  
  

Unconventional Mortgages

• Unconventional mortgages are loans that offer consumers options. Some examples of unconventional loans are: interest-only loans, negative-amortization loans, 40-year loans, and, in some cases, adjustable- and variable-rate mortgages. These loans--especially negative-amortization loans, where a principal balance can increase--were introduced in the market for real estate speculators to help keep monthly payments low. Residential customers--especially first-time homebuyers--should in most cases avoid these "exotic" loans.
  
  

Insured Mortgages

• Insurance on a mortgage can mean a couple things. First, for new-purchase loans, unless a borrower has paid a significant downpayment (usually 20 percent), most mortgage companies will charge private mortgage insurance, or PMI, on the loan. This insurance protects the lender against customer default and foreclosure. Customers can also elect insurance products--sometimes called payment protection--to add to their monthly payments. Usually, the options available are life, disability and involuntary unemployment insurance.
  
  

Uninsured Mortgages

• If you have a mortgage without any payment protection (mortgage insurance), you (or your spouse) will still responsible for all payments if you become disabled, unemployed or die. If you have PMI on your mortgage and you lose the house to foreclosure, the bank or finance company holding your mortgage will be reimbursed the lost funds by the insurance company.
  
  

Selecting the Right Mortgage

• Picking the right loan home loan begins with research. There are many websites that offer sound, unbiased financial advice regarding mortgages. Also, you should know your financial goals and limitations--including a well-thought out budget accounting for all expenses.