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Buying a home is probably the largest purchase you鈥檒l make in your lifetime. And choosing the right mortgage聽is one of the most important decisions you鈥檒l make in the聽. With so many different options out there, it can be hard to find an affordable home loan that meets your financial goals.

Start by asking聽yourself 鈥�?鈥� After taking inventory of your debts, credit score, income and other monthly bills, you聽can聽make an informed decision about the terms of your mortgage.

Here are three key loan decisions you鈥檒l need to make.

Mortgage type: Government-backed or conventional

There are聽two main types of mortgages: a聽聽guaranteed by a private lender or banking institution, or a government-backed loan.

Most government-backed mortgages come in one of three forms:

• , insured by the Federal Housing Administration,聽were established to make homebuying more affordable, especially for first-time buyers, by allowing down payments as low as 3.5% of the purchase price.
• 聽are insured by the Veterans Administration and offer buyers low- or no聽down payment options and competitive聽. They鈥檙e available to current military service members and veterans only.
• 聽are backed by the U.S. Department of Agriculture and are geared toward rural property buyers who meet income requirements.

All three programs follow the limits聽for conforming loans and have low down payment requirements. More on that later.

Conventional loans, on the other hand, are offered and backed by private entities such as banks, credit unions, private lenders or savings institutions. Borrowers need good credit to qualify. This is because the loans aren鈥檛 guaranteed by an outside source聽鈥� so the possibility of聽borrower default poses a greater risk for lenders.聽Conventional loans have聽terms of 10, 15, 20 or 30 years. They聽also require much larger down payments than聽government-backed loans. Borrowers are expected to put down at least 5%, but that amount can vary based on the lender and the borrower鈥檚 credit history.

If you don鈥檛 have a lot of cash saved up for a down payment but have solid credit and a stable income, a government-backed loan is likely the way to go. Keep in mind that if you choose a conventional or government-backed loan and you鈥檙e making聽less than a 20% down payment, you鈥檒l have to pay for聽. If you can afford to save up a large down payment and build your credit score while lowering your debt-to-income ratio, a conventional loan聽is a great choice that can eliminate some of the extra fees and higher interest rates that may come with a government-backed loan.

Interest rate: Fixed or adjustable

Once you鈥檝e chosen your聽loan, you鈥檒l decide whether you want a聽聽or an聽. Your choice determines聽the interest you鈥檒l be charged.

The interest rate on a fixed-rate loan never changes. If you鈥檙e settled in your career, have a growing family and are ready to set down some roots, a 15- or 30-year fixed-rate loan might be your best bet, because you鈥檒l always know what your monthly mortgage payment will be. It鈥檚 worth noting, though, that if other fees are rolled into your monthly mortgage payment, such as annual property taxes or homeowner鈥檚 association dues, there may be聽some fluctuation聽over time.

Adjustable-rate mortgages, or ARMs, have interest rates that reset at specific intervals. They typically begin with lower interest rates than fixed-rate聽loans, sometimes called teaser rates. After the initial term ends, the interest rate 鈥� and your monthly payment 鈥斅爄ncreases or decreases聽annually based on an index, plus a margin. They聽most often appeal to younger, more mobile buyers who plan to stay in their homes for just a few years or refinance when the teaser rate approaches expiration. Paying a lower interest rate in those initial years could save hundreds of dollars each month that could fund聽other investments.

Loan size: Conforming or non-conforming

The amount of聽money you borrow tells your lender a lot about your level of risk 鈥� and it has a big impact on your interest rate. For this reason, home loans fall into two main size categories:聽.

Conforming loans meet聽the loan limit guidelines set by government-sponsored mortgage associations聽Fannie Mae and Freddie Mac. In 2016, conforming home loans for single-family homes in most of the continental U.S. are limited to聽. In designated high-cost areas, such as Hawaii and Alaska, the conforming loan limit for single-family homes goes up to $625,500.

Loans can be non-conforming for a few different reasons. Some, called聽jumbo loans, are for borrowers whose loan amounts are higher than the conforming loan limits in their areas. Jumbo loans are considered riskier and come with higher interest rates to protect lenders. You鈥檒l need to make a larger down payment (at least 20%) and have pristine credit to qualify for one. Other types of non-conforming loans include those made to borrowers with poor credit, high debt or recent bankruptcies.

If you want to stay within conforming loan limits, you鈥檒l need to tailor your home search to properties priced below the loan limit for your area. Another way to ensure you qualify for a conforming loan is to save up 20% or more聽for a home that鈥檚 priced above your local limit.

The bottom line

All of these options might seem overwhelming at first glance. But bear in mind that the type of loan you鈥檒l wind up getting will depend largely on your credit profile, income and overall financial goals. Before you start shopping for a home loan, take complete stock of your finances, and try to聽聽as much as possible.

If you need guidance, contact a lender or聽聽in your area to help you crunch the numbers and explore your options.

This article first appeared at .