Which mortgage is best? Options for 3 life stages (© Robert Llewellyn/Corbis)

© Robert Llewellyn/Corbis

Although any home loan might be the right choice for homeowners of any age, mortgage needs change over a lifetime.

Here's a look at which loans are best-suited to different life stages, including when you're just starting out, hitting middle age and preparing to retire.

Starting out
Many of today's young people are well-positioned to buy their first home, says Jim Pomposelli, a mortgage banker at Federal Savings Bank in Chicago.

"We're dealing with a generation that's much more responsible," he says. "These are people who have great credit and solid, stable income. They just don't have the down payment, and they have student-loan debt, which is a huge burden." (Bing: How bad is our student-loan-debt problem?)

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Often, the solution to the down-payment problem is "generational wealth" that's moving from grandparents and parents to younger people, Pomposelli says.

Two types of mortgages likely are appropriate for younger buyers, says Rob McAllister, owner and mortgage broker at West Seattle Mortgage in Seattle. One is a low-down-payment, conventional mortgage. The other is a mortgage insured by a government agency.

A conventional mortgage with a 5% down payment offers "the best option in terms of interest rate and mortgage insurance," McAllister says, while a loan insured by the Federal Housing Administration meets the needs of borrowers who have lower credit scores or are receiving their down payment as a gift.

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For those who can qualify, a Department of Veterans Affairs loan is even better.

"VA offers zero down, no mortgage insurance and very, very good interest rates," McAllister says. "It's still solid gold for a first-time buyer."

Approaching middle age
Homeowners in their late 30s and 40s tend to seek mortgage products depending on whether they have equity or owe more than their home is worth.

Those who aren't underwater and who want to move to a different house or refinance can consider a two-loan package, Pomposelli says.

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"A low-4% range first mortgage and a home-equity line of credit is attractive financing for somebody who's more established," he says. "These people have assets. They can handle the debt. It's more attractive to them."

Those who are underwater can consider the latest incarnation of the federal government's Home Affordable Refinance Program, known as HARP 2.0. This plan, which has no cap on the borrower's loan-to-value ratio, suits homeowners who want to refinance and lock in a low interest rate, McAllister says.

"That's been a good fix for first-time buyers who bought in 2006, 2007 and 2008," he says. "There are 150% [loan-to-value] loans that are going through."

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Retirement age
Homeowners hitting retirement age are refinancing into 15-year mortgages and placing the savings achieved by a lower payment into their retirement accounts.

Some borrowers at retirement age opt for a fixed interest rate in the 3% range, while others change to an adjustable rate that starts as low as 2.25%. The adjustable rate is risky but can be smart for people who plan to sell before the rate resets, McAllister says.

Another hot ticket for homeowners of retirement age is a new or refinanced mortgage that generates cash for a child's or grandchild's first down payment, says Scott Lanoff, president of American Success Mortgage in Briarcliff Manor, N.Y.

"A lot of seniors own their home free and clear," Lanoff says. "The homes are worth less than they ought [to be] or should have been, but they still have equity, and that's powerful."

Some folks also are using their retirement income — whether it's from Social Security, a corporate or government pension or both — to buy homes for themselves. Pomposelli cites one fellow who's living on a fixed income and recently bought a fixer-upper house.

"He's retired, and he's getting a single-family home that he wants to repair and live in," Pomposelli says. "He's looking to have something to do."

Another option for seniors is a reverse mortgage, which taps equity to generate a lump sum or a stream of monthly payments. Brokers often offer this loan with reservations, saying it's best viewed as a last resort because of the high cost and other factors.

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"It's not something I particularly like because you have to strip equity from the property to do what you're trying to do," Lanoff says. "But for some people, it's in the only game in town."