Here’s a brief rundown of some of today’s most popular mortgage vehicles and information on the types of buyers who would most benefit from them.

• Fixed-rate mortgages: Principal and interest payments are fixed for the life of the loan, be it 10, 15, or 30 years.
• Possible candidates: Those who want regular payments; plan to stay in a home for a long period of time (five years or more); and want to lock in interest rates while they’re very low.
• Adjustable-rate mortgages (ARMs): Lenders offer multiple ARM products and some loans, called hybrids, begin as ARMs and convert to a fixed rate after a certain period of time (two, three, five, seven, or 10 years). These products aim to combine the best attributes of fixed and adjustable loans. Interest rates and monthly payments typically are lower than those of a fixed-rate mortgage, but can adjust up or down at the end of the rate term, depending on the type of ARM it is and what financial index the loan is tied to.To make ARMs even more consumer-friendly and flexible, some lenders offer products that feature flexible payment options—minimum payments, interest-only payments, and 30- or 15-year payments (which allow borrower to pay off the loan as if it were on a 30- or 15- year schedule).
• Possible candidates: Those who want to maximize buying power; desire smaller house payments to pay off other debts or spend dollars elsewhere; want lower monthly payments for the initial period of a loan; expect to move or refinance before initial rate ends; or expect income to rise in coming years. The 5/1 ARMs (where the rate is fixed for the first five years, and then becomes an adjustable-rate mortgage in the sixth year) work well for many of his first-time condo buyers.
• • Interest-only loans: Payments consist of only interest for the first five to 10 years of the loan. After the interest-only period, borrowers have 20 to 25 years (depending on the loan terms) to pay off the principal plus interest.
  • Possible candidates: Buyers who want greater short-term cash flow; intend to refinance or move within a few years; want to qualify for a more expensive house; have irregular cash flow (real estate practitioners, for example) or income that is tied to bonus income; live in rapidly appreciating areas; wish to divert extra cash to other investment property, retirement funds, etc. Interest-only loans are a hot product because borrowers have the option each month of making an interest-only payment or also of paying down principal. It’s good for people with fluctuating incomes. When it’s famine time, you pay interest only and when it’s feast time, you pay toward principal. Some of the dangers of this type of loan are that if you only make interest payments, the principal does not decrease so you don’t build equity unless the home appreciates; and you could potentially end up owing money when you sell if the house doesn’t appreciate. Also, at the end of the fixed interest payments, you have to start paying the principal, pay a lump sum, or refinance.
  • No downpayment loans: Allows financing of the entire purchase price of the property, plus closing costs.
  • Possible candidates: Those with good credit but little savings; first-time buyers who have trouble saving a downpayment; those with money tied up in investments they don’t want to liquidate for a home purchase. The downside of this type of loan is that you will pay higher interest rates because of the higher risk of these loans. You also have to factor in the monthly cost of private mortgage insurance.
  • Low downpayment loans: Allows a low 3 percent downpayment that doesn't have income restrictions or first-time homebuyer requirements.
  • Possible candidates: Those with good incomes but limited savings; those who want a larger mortgage to buy a bigger home; those who want the downpayment to come from personal savings, gifts, or loans from relatives or others. Low downpayment options are helpful to borrowers in rapidly appreciating areas, such as California. Many people are diligent savers, but they’re unable to save at the same rate of appreciation. It’s where these loans come into play and help fill a gap.
  • Reverse mortgages: Elderly or retired property owners can tap their home equity for expenses and increase their monthly income; rather than paying the lender a monthly payment, the homeowner receives money from the lender; mortgage is repaid from the home’s equity when occupants sell the property, move out permanently, or die.
  • Possible candidates: Senior citizens over the age of 62 who wish to stay in their home and use the equity for things such as living expenses, medical expenses, home repairs, long-term health care, and other expenses. It’s often an option for people who are house-rich but cash-poor.