When people are purchasing a home, they may feel overwhelmed by the prospect of determining which kind of home loan is right for them. There are home loans with varying years, interest rates and amounts. While it is up to the individual's situation to determine which type of loan is the right one for them, there are some guidelines that one should keep in mind.

First, one should be familiar with the types of loans available to them. The three most common types of home loans are adjustable rate mortgages, fixed rate mortgages and combination rate mortgages.

Adjustable Rate Mortgages

An adjustable rate mortgage may be appropriate for a person who will not reside in his or her home for more than five years, who is comfortable with the possibility of payment increases in the future and monthly payment changes, and who believes his or her income will increase in the future.

Fixed Rate Mortgages

For those who intend to live in their homes for more than five years, prefer loan and payment stability, and expect their income to be consistent for many years, a fixed rate mortgage may be for them. A fixed rate mortgage is best for people who are more conservative with their investing and big financial purchases.

Combination Rate Mortgages

Lastly, there is the combination rate mortgage. Since this is a combination of an adjustable and fixed rate mortgage, there are many factors a person may wish to consider before deciding upon this type of loan. A combination rate mortgage may offer short term stability with a fixed interest rate and lower monthly payments with the option to borrow more than a standard fixed rate loan.

If a person has a poor credit rating, a combination rate mortgage is a great opportunity to demonstrate steady monthly payments. If a person shows a solid pattern of good credit with this type of home loan, then they may have the option at a later date of refinancing their loan for a lower interest rate.