A standard, low-fee loan that's a great option for those with good credit and low debt.
A government-insured loan with a low down payment and more lenient credit score requirements.
A no down payment loan for qualified service members, veterans, reservists, or surviving spouses.
A loan for homeowners 62 and older that allows them to convert their home equity into cash.
A loan for borrowers with non-traditional financial situations, such as those who are self-employed.
A loan that helps in situations where housing is expensive or the cost of the home exceeds county limits.
Conventional loans are best for those with good credit and a low debt-to-income (DTI) ratio. Also, when you pay 20% down, you’re not required to pay for private mortgage insurance (PMI).
- Potential to save money with a down payment of 20% of more
- Possible down payments as low as 3%
- Flexible payment terms, 45% DTI ratio
- Best for homebuyers looking for a mortgage with low fees
FHA loans are backed by the government and are popular with first-time homebuyers looking for a low down payment. The credit score requirements are also more lenient.
- Low down payment requirement (as low as 3.5%)
- Lenient credit score
- Less strict income requirements, DTI ratio of 50% or less
- Best for home buyers recovering from financial setbacks or have thin credit
If you're a qualified service member, veteran, reservist, or surviving spouse, a VA loan requires no money down, and you do not have to pay private mortgage insurance.
- 0% down payment required
- No private mortgage required
- Loan can be used to purchase property, refinance, or improve current home
- Only for service members, veterans, reservists, or surviving spouses may be eligible
A rehab loan covers the cost of the home you're purchasing and provides additional funds for renovations. Both costs are wrapped up into one convenient loan.
- Down payment as low as 3.5%, DTI ratio of 45% or less
- Streamlined loan that can cover both the cost of the home and improvements
- Access to more affordable homes
- Best for home buyers who need capital for a fixer-upper
A reverse mortgage is a loan taken against home equity. It’s paid back when the borrower no longer lives in the home, and the amount due increases over time with interest and fees.
- No credit score required
- No income necessary
- Suitable for borrowers who need to convert part of their home equity into cash
- Only for borrowers age 62 and above, and must own home outright or have at least 50% equity in home
Non-QM (Non-Qualified Mortgage) loans are for non-traditional borrowers, such as self-employed or seasonal workers, those who are credit-challenged, or those who have difficulty qualifying for a traditional loan.
- Borrowers with non-traditional financial situations may qualify
- Flexible credit score requirement, DTI ratio of 43% or less (higher numbers may be negotiable)
- Alternative payment terms available
- Best for home buyers who are self-employed, have fluctuating income, or own significant assets
Jumbo mortgage loans are for those interested in purchasing a higher-priced property that exceeds the area’s maximum loan amount set by Fannie Mae and Freddie Mac.
- Borrow a bigger loan compared to conventional loans. Underwriting may be stricter.
- Alternative qualification available
- Fixed or adjustable rate mortgage rates available
- Best for home buyers that live in an expensive area or need loans that exceed county limits.
|Loan Type||Down Payment||Credit Score||Upfront Fees||Mortgage Insurance|
|Conventional||3% - 5%||620+||No upfront fees||Yes|
|Jumbo||10%||680+||No upfront fees||No|
|FHA||3.5%||500+||1.75% MIP||.45% to 1.05%|
|VA||0%||580+||0% - 3.6%||None|
|Rehab||3.5% - 5%||580+||0% - 1.75% MIP||0 - 1.05% MIP|
|Non QM||10%||620+||No upfront fees||None|
Can I buy a home if I have a low credit score?
Credit scores are not the end-all and be-all requirement for mortgage applications. But they do play a big part in home loans. You can still qualify if you have a low credit score, but you may end up paying a higher interest rate. And that means you would end up paying more throughout the lifespan of your mortgage.
How do I determine my debt-to-income ratio?
Your debt-to-income (DTI) ratio is an indication of your overall financial health. To determine your DTA, first add up all of your monthly bills (i.e., rent, auto loans, credit cards, student loans). Do not include expenses like groceries, utilities, or gas for your vehicle. Next, divide the total by your gross monthly income (your income before taxes). The calculation will give you your DTI (a percentage). The lower your DTI percentage, the better.
Does a pre-approval impact my credit score?
Yes. While a pre-approval is a wise move when you're ready to begin your home buying journey, it is considered a hard inquiry on your credit report.
Which is better, a fixed-rate loan or an adjustable-rate mortgage (ARM) loan?
With a fixed-rate loan, the interest rate never changes throughout the life of the loan. As a result, many homebuyers prefer a fixed-rate loan because it provides them with a stable mortgage payment.
An adjustable-rate mortgage will fluctuate as interest rates change. It will stay the same during an introductory period (months or years depending on the loan). Then once that fixed period ends, the interest rate fluctuates periodically (i.e., every six months). It's a bit of a gamble but can pay off if interest rates decrease.
What are mortgage points?
Mortgage points are a way for you to lower the interest rate on your loan. You pay an upfront fee. Each point costs you 1 percent of your total mortgage amount and will typically reduce your interest rate by 0.25 percent.
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