Types of Financing

Buying a home is an incredibly exciting experience! It is a moment that a lot of people plan for and look forward to. Once you begin the process of searching for a home and you see prices in the hundreds of thousands, that can be intimidating to figure out how to finance your purchase. The first step in the home buying process would be to figure out what your budget is and what you qualify for. That means getting in touch with a local lender to begin the process. This page is intended for basic, introductory information. For further information feel free to reach out to your lender or one of our recommended lenders.

Conventional Mortgage

This is the most common type of mortgage seen in real estate transactions. In order to qualify, a lender would look at your credit score and your debt-to-income ratio. If you do qualify, the lender will inform you of the amount that you would qualify for and this then begins the home buying process. It is important to find a local, trusted lender as they work hand-in-hand with your real estate agent throughout the process. Typically, a down payment of 20% is standard with a conventional loan; however, there can be flexibility with the down payment price.

Fixed-Rate Mortgage

A fixed-rate mortgage simply means that your payment will remain predictable throughout the duration of your loan.

Adjustable-Rate Mortgage

An adjustable-rate mortgage is a 30-year loan and the name speaks for itself. The rates with this type of loan are adjustable, meaning that the rates shift with the market. There is typically an introductory period that has more of a fixed-rate, that is often times at a lower interest rate than fixed-rate mortgages. After the introductory period, the rates then begin to shift with the market.

Government-Backed Loan

If you are unable to qualify for a conventional loan, the next step would be to see if you qualify for one of the government-backed loans listed below. Each of which has specific qualifying criteria.

FHA

These loans are insured by the Federal Housing Administration. The eligible qualifying credit score is lower than that of a conventional loan as well as the down payment percentage being lower than 20%.

USDA

These loans are insured by the United States Department of Agriculture. This loan allows you to purchase a home with no money down; however, the qualifiers are based on income and certain geographic areas such as some rural or suburban areas.

VA

These loans are insured by the Department of Veterans Affairs. As with a USDA loan, this allows you to purchase a home with no money down and lower interest rates than other types of loans. In order to qualify you must meet service requirements for the Armed Forces or National Guard.

If you are in the beginning stages of buying a home and aren’t sure where to start, we always suggest solidifying your financing as this will then guide the rest of the home search. We wish you well on your journey and are always here to help, wherever you may be at in the process!

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