What types of loans are available and what are the advantages of each?

Fixed Rate Mortgages: Payments remain the same for the the life of the loan.

Types:

15-year
30-year 39

Advantages:

Predictable
Housing cost remains unaffected by interest rate changes and inflation.

Adjustable Rate Mortgages (ARMS): Payments increase or decrease on a regular schedule with changes in interest rates; increases subject to limits.

Types:

Balloon Mortgage - Offers very low rates for an initial period of time (usually 5, 7, or 10 years); when time has elapsed, the balance is due or refinanced (though not automatically)
Two-Step Mortgage - Interest rate adjusts only once and remains the same for the life of the loan
ARMS linked to a specific index or margin 41.

Advantages:

Generally offer lower initial interest rates
Monthly payments can be lower
May allow borrower to qualify for a larger loan amount