Home Loan Options

Buying a home is one of the most important financial decisions you’ll make. The right mortgage can help you secure the best possible terms, lower monthly payments, and long-term financial stability. Below, we outline the most common mortgage loan types to help you understand which option best suits your needs.

1. Conventional Loans

Conventional loans are the most common mortgage option, offering flexible loan terms and competitive interest rates. These loans are not backed by the government, meaning they follow the lending guidelines set by Fannie Mae and Freddie Mac and are insured by private lenders.

Key Benefits of Conventional Loans:

• Wide range of loan term options (10, 15, 20, or 30 years)
• Lower interest rates for well-qualified borrowers
• No mortgage insurance with at least 20% down
• Higher loan limits than government-backed programs

Basic Conventional Loan Requirements:

Credit Score: Minimum 620+ for most lenders

Down Payment: 20% recommended (as low as 3-5% with PMI)

Debt-to-Income Ratio (DTI): Typically 43% or lower

Income & Documentation: Two years of W-2s, tax returns, and bank statements

Private Mortgage Insurance (PMI): Required if the down payment is less than 20%

Who Should Consider a Conventional Loan?

• Borrowers with good credit (620+) and stable income
• Buyers who want lower monthly payments without mortgage insurance
• Homebuyers looking for flexible loan terms and high loan limits

2. FHA Loans

FHA loans are government-backed mortgages insured by the Federal Housing Administration. These loans are ideal for first-time buyers and those with lower credit scores because they have lower down payment requirements and more flexible credit guidelines.

Key Benefits of FHA Loans:

• Lower credit score requirements (starting at 550-580)
• Low down payment (3.5% down)
• More lenient debt-to-income ratios
• Seller or lender can help with closing costs
• Available fixed-rate and adjustable-rate options

Basic FHA Loan Requirements:

Credit Score: 580+ for 3.5% down (or 550 with 10% down)

Debt-to-Income Ratio: Typically 50% or lower

Mortgage Insurance (MIP): Required for the life of the loan unless refinanced

Loan Limits: Varies by county, generally lower than conventional loan limits

Property Requirements: Must meet HUD’s minimum property standards

Who Should Consider an FHA Loan?

• First-time homebuyers with limited credit history
• Buyers with lower credit scores or higher debt-to-income ratios
• Homebuyers who need seller-paid closing costs
• Those looking to finance home renovations with an FHA 203(k) loan

3. VA Loans (For Military & Veterans)

VA loans are mortgages guaranteed by the U.S. Department of Veterans Affairs (VA). These loans are exclusively available to active-duty military, veterans, and eligible surviving spouses. VA loans require no down payment and no mortgage insurance, making them one of the most affordable loan options.

Key Benefits of VA Loans:

• Zero down payment required
• No monthly mortgage insurance (PMI or MIP)
• Competitive interest rates
• Flexible credit score and debt-to-income requirements
• Limits on closing costs to protect borrowers

Basic VA Loan Requirements:

Eligibility: Must be an active-duty service member, veteran, or qualifying spouse

Credit Score: 580+ preferred (varies by lender)

Debt-to-Income Ratio: Typically 41-50%

VA Funding Fee: One-time fee (can be rolled into the loan)

Who Should Consider a VA Loan?

• Veterans, active-duty service members, and eligible spouses
• Buyers looking for 100% financing with no down payment
• Those who want to avoid mortgage insurance and save on monthly payments

4. USDA Loans (For Rural & Suburban Homes)

USDA loans are government-backed mortgages designed for rural and suburban homebuyers. These loans offer 100% financing, meaning no down payment is required.

Key Benefits of USDA Loans:

• Zero down payment required
• Low mortgage insurance compared to FHA loans
• Competitive interest rates
• Flexible credit and income requirements

Basic USDA Loan Requirements:

Location Requirement: Home must be in a USDA-eligible rural or suburban area

Income Limits: Must be below 115% of the area median income (AMI)

Credit Score: 640+ preferred (lower scores may qualify with additional documentation)

Debt-to-Income Ratio: Typically 41% or lower

Who Should Consider a USDA Loan?

• Buyers looking for 100% financing with no down payment
• Homebuyers purchasing in rural or suburban areas✔ Those who want lower mortgage insurance costs

Which Loan is Right for You?

The best loan option for you depends on your credit score, down payment, income, and home location. Here’s a quick comparison:

Loan Type Min. Credit ScoreDown PaymentMortgage InsuranceBest ForConventional620+3-20%Required if <20% downBuyers with good credit & stable incomeFHA550+3.5%+RequiredFirst-time buyers & those with lower creditVA580+0%NoneMilitary & veterans looking for 100% financingUSDA640+0%RequiredBuyers in rural/suburban areas

Need Help Choosing the Right Loan?

Your mortgage should be tailored to your financial goals and homeownership plans. If you’re unsure which loan best suits your needs, we’re here to help!

Contact us today to speak with a mortgage specialist and explore your options!