Picking the Right Mortgage

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Rates on 30-year mortgages down from last year

Updated July 4, 2014 5:11 p.m. ET

wallstreetjournal7-8-14Banks are hoping a little variety can bring some life to the ailing mortgage market.

They are starting to ease their stringent requirements and offering a wider range of loans. The options being dusted off—many of them dormant since the housing bust—include interest-only mortgages and so-called piggyback loans. They also are promoting adjustable-rate mortgages and rolling out more-attractive terms.

These options can make it easier to purchase a home or lower your monthly payments for years, and they may be appealing options in certain circumstances if you understand the risks. Yet some loans that lenders are promoting now could cause major problems down the road, as many borrowers learned during the financial crisis.

In most cases, experts say, plain-vanilla, fixed-rate mortgages remain the best choice.

Since the 2008 subprime-mortgage meltdown, lenders have for the most part approved only borrowers with near-perfect credit scores and significant assets. Now—as the Mortgage Bankers Association forecasts a 42% decline in the dollar amount of new and refinanced mortgages this year—lenders are broadening their pitch to include home buyers with slightly weaker credit and offering more options for borrowers who can’t afford to make a 20% down payment.

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