There are three primary kinds of loans, each of which has several varieties:

1. Conventional loans

2. HUD/FHA loans

3. Veterans Administration (VA) loans

Each of these loans has different requirements, the most important of which is usually the required minimum down payment. These types of mortgages and their variations are discussed in the following sections.

Conventional loans Many would-be homeowners believe that all lenders require a 20 percent down payment. In other words,if you want a $100,000 home, the required downpayment is $20,000. (The rules are different forhomes valued at over $1 million.) This requirementis due to the lender's concern about loan default. Ifthe borrower is paying a 20 percent down payment,the lender often feels secure about making the loan.In fact, the default rate of loans with a 20 percent down payment is frequently less than one half of 1 percent. However, some conventional mortgages are available with as little as a 5 percent down pay-ment, in which case you would need a $5,000 down payment for a $100,000 house. These low down pay-ment conventional loans are usually insured by the government.

What makes low down payment mortgages possible is private mortgage insurance (PMI). PMI generally costs 1 to 5 percent of the monthly principal and interest payment amount, and its purpose is to protect the lender in case of borrower default. If the borrower defaults, the mortgage insurance company pays the mortgage payments.

Over time, homeowners build equity in their homes in two ways. First, the value of the house can appreciate. Second, the monthly house payment will pay down the principal of the loan and the equity position of the homeowner increases. Once you have reached a 20 percent equity position inyour home (where you own 20 percent of the current equity in the house, not 20 percent of the purchase price), you can cancel your mortgage payment insurance. (Your bank likely won't tell you when you reach this point. You have to keep track of it yourself.

There are many varieties of conventional home loans. The following is a list of the most popular kinds:

• Fixed-rate mortgages. These loans have a fixedinterest rate and loan term (15- and 30-year mortgages are the most popular). You'll always know what you're paying because the interest rate and monthly payments are fixed for the term of the loan.

• ARMs. These loans change periodically (if the market index of the interest rates they are tied to increases or decreases). The monthly pay ment may stay the same, but the "shortfall" is added to the principal to create negative amortization. That is, the principal balance increases, not decreases, as payments are made. Most ARMs have a fixed ceiling and or floor interest rate on the mortgage. It can go up or down, depending on market conditions, but only within stated limits that you agreed to when you received the loan.

• Graduated-payment mortgages. These loans have periodic payments that increase one or more times during the term of the mortgage. The loan may start with interest rates that are below market rate, and then increase over time.

• Renegotiable mortgages. The interest rate is fixed but renegotiated at specific periods to adjust the interest rate closer to the market rate.

• Price-level-adjusted mortgages (PLAMs). These loans provide for periodic increases or decreases in the loan amount on the basis of a predetermined price index. The interest rate and term remain fixed.For more information on the different types of home loans, see Fannie Mae's HomePath (www. homepath.com) or the HUD Home Buying Guide (www.pueblo.gsa.gov/cic_text/housing/hudhome/ hudhome.txt).

HUD/FHA loans In an effort to increase home ownership, the FHA,an agency of HUD, insures loans made by lenders to all U.S. citizens and aliens who are permanent residents and who meet its financial requirement rules. FHA insures the total amount of the lender'sloan and lets qualified individuals buy affordable homes.

The minimum down payment for HUD/FHA loans can be less than 5 percent for single-familyhomes that cost between $67,500 and $151,725 incertain high-cost areas (maximum home loan amounts vary by region). For more information, see www.hud.gov/mortprog.html (shown below) or contact an online mortgage lender. (The FHA loanWeb site [www.hud.gov] also provides state-by-stateFHA maximum mortgage limits.)

VA loans The Veterans Administration has a home loan pro-gram for eligible veterans and selected reservists.Veterans are defined as individuals who served on active duty and were not dishonorably discharged.The department does not make mortgage loans, butit does guarantee part of the home loan you get I from your online mortgage lender. VA loans requireI a 5 percent down payment, a maximum loan term of 30 years, and have low interest rates (the rate is generally about 1 percent less than the market rate). For more information, see the Veterans ; Administration Web site (www.vba.va.gov/bln/ I loan/index.htm).

Choosing a program thafs right for you Lenders Interactive Online Network (www.lioninc. corn) is a Web-based company that posts lenderinterest rates, products, guidelines, and more. Thisallows you to compare hundreds of banks from oneWeb site. The Internet has additional advice on different types of loan programs. The following is a sample of what's available:

Mortgage.com (mortgage.com) has a seven-step wizard that helps you choose the loan program that meets your financial profile.

AppOnline.com (www.apponline.com) has a mortgage loan advisor that can assist you in finding the loan program that's right for you.

Mortgage 101. corn (www.mortgagel01.com) is sponsored by America Mortgage Online and includes a vast amount of information about loan programs

iOwn.com (www.iown.com/buy/) provides three types of assistance: defining mortgage types, calculating monthly payments, and suggesting a mortgage based on your personal needs.