Mortgages & Loan Types Explained

30-year vs. 15-year fixed: the real trade-off

A fixed-rate loan locks your rate and principal-and-interest payment for the life of the loan — the simplest, most predictable choice. The decision most buyers face is term length.

Here's the trade-off in plain numbers. On a $500,000 loan, a 30-year term keeps your payment low and your cash flexible, but you pay far more total interest. A 15-year term carries a noticeably higher monthly payment but a lower rate and builds equity dramatically faster — you can pay less than half the lifetime interest. The veteran move for most first-timers: take the 30-year for the safety of a low required payment, then make extra principal payments when you can. You get 15-year-style payoff speed without being locked into the higher payment if money gets tight.

• 30-year fixed: lowest payment, most total interest, maximum flexibility. The default for most buyers.
• 15-year fixed: higher payment, lower rate, far less interest, faster equity. Great if your income is stable and high.
• 20-year and 10-year fixed exist as a middle ground.
• There's usually no prepayment penalty — so a 30-year you pay aggressively can mimic a 15-year on your terms.

Adjustable-rate mortgages (ARMs): when they actually make sense

An ARM is fixed for an initial period, then adjusts periodically based on a market index (commonly SOFR) plus a fixed margin. It usually starts with a lower rate than a comparable fixed loan. The naming tells you the structure: a '7/6 ARM' is fixed for 7 years, then adjusts every 6 months; a '5/1' adjusts annually after 5 years.

ARMs aren't reckless — they're a tool. They make sense if you're confident you'll sell or refinance before the fixed period ends (a job you expect to relocate from in ~5 years, for example), or when fixed rates are high and you expect to refinance lower later. The risk is the opposite: life changes, you stay, and your rate adjusts up. Always read the caps before signing.

• 5/6 ARM: lowest intro rate, most future uncertainty — for short holders.
• 7/6 ARM: a balance of upfront savings and stability.
• 10/6 ARM: closest to a fixed loan with a slightly lower intro rate.
• Rate caps limit your risk: an initial cap (first adjustment), a periodic cap (each adjustment), and a lifetime cap (the ceiling). Know all three.

Temporary buydowns and discount points

A discount point costs 1% of the loan amount upfront and permanently lowers your rate. Whether it's worth it comes down to your break-even: divide the cost by the monthly savings to see how many months until you come out ahead. If you'll keep the loan longer than that, points can pay off; if you might refinance or move sooner, save the cash.

A temporary buydown (like a '2-1 buydown') lowers your rate for the first year or two, then steps up to the note rate. These are often paid by a seller as a concession in a softer market — useful to ease into payments, but make sure you can afford the eventual full payment, because that's what you're truly committing to.

Conventional vs. government-backed loans

Conventional loans aren't government-insured. You can put down as little as 3%, but under 20% you'll pay Private Mortgage Insurance (PMI) — the upside is PMI automatically drops once you reach ~20% equity, so it's temporary.

FHA loans (insured by the FHA) allow 3.5% down with a 580+ score and are more forgiving on credit, but the mortgage insurance (MIP) often lasts the life of the loan — many buyers refinance into a conventional loan later to shed it. VA loans (eligible veterans/service members) are the gold standard: 0% down, no monthly mortgage insurance. USDA loans offer 0% down in eligible rural areas (parts of outer Snohomish/Pierce counties qualify).

• Low credit or thin savings → FHA is often the entry point, with a plan to refinance later.
• Strong credit and ~5%+ down → conventional usually wins on total cost because PMI is removable.
• Eligible veteran → a VA loan is almost always the best deal available.

Conforming vs. jumbo loans (this matters a lot in Seattle)

Loans at or below the conforming limit can be bought by Fannie Mae/Freddie Mac and carry the best rates. For 2026 in high-cost King, Snohomish, and Pierce counties, the 1-unit conforming and FHA limit is $1,063,750 (the national baseline is $832,750). Because Seattle prices push right up against this, staying under the limit can meaningfully lower your rate.

Go a dollar over and it's a 'jumbo' loan: typically stricter credit, larger down payments, and more reserves. Sometimes putting a bit more down to land under the conforming line is the cheaper overall move — ask your lender to price it both ways.

How to compare lenders the smart way

Every lender must give you a standardized 3-page Loan Estimate within 3 business days of applying. This — not the rate someone quotes you over the phone — is your real apples-to-apples comparison tool. Get them from 2–3 lenders dated the same day, because rates move daily.

The headline rate is marketing; the APR and the total cash-to-close tell the truth. A lower rate bought with thousands in points isn't automatically better. Lay the Loan Estimates side by side and compare Section A (origination), the rate, and total closing costs together.

• Compare APR and total closing costs, not just the rate.
• Scrutinize lender fees (origination, underwriting, processing) and any lender credits.
• Rate-shopping within a 14–45 day window counts as a single credit inquiry — so shop freely, it won't dent your score.
• Ask about the rate lock: how long, the cost to extend, and whether there's a float-down if rates drop before closing.
• A great local lender who closes on time is worth a tiny premium — a blown closing date can cost you the house.