Are you a first-time home buyer, or even a seasoned investor? Do you clearly understand what mortgages are available and right for you? As you embark on the exciting journey of homeownership, we understand that deciphering the world of mortgages can feel like cracking a complex code. Let’s take a look at your options.

Here are a few words you need to know about mortgages. A fixed rate is a safe and reliable choice. Throughout the life of the loan, the interest rate stays the same. There are also “ARM” adjustable rate mortgages; these mortgages typically start out with a lower interest rate and climb up at a set date. In most cases, there is a maximum limit to what the interest rate can rise during the set period of time (at three, five, seven, or ten years, depending on the terms that have been agreed upon). When you’re planning to sell or refinance in a few years, this might be a good option. Due to the increasing payments over time, it is a more risky type of loan. However, you have to qualify for the higher payments first. Now let’s dive into the different mortgage programs.

First, let’s start with conventional mortgage loans. This loan program can be for first-time home buyers or investors. The minimum down payment is 3%, most lenders require a minimum of a 620 credit score, and your debt-to-income ratio must be under 43% (some lenders may be able to go higher on the debt-to-income ratio). What are some other benefits of a conventional loan? If you put down a down payment that is greater than 20%, you will not have to pay private mortgage insurance. Don’t worry, though, if you cannot put down that large of a down payment. Once you have paid 20%, you can ask the bank to remove the “PMI,” and if you forget, it falls off at 22% with most banks.

If you’re looking for a mortgage option that offers flexibility, accessibility, and a low down payment, the Federal Housing Administration (FHA) loan might be the perfect fit. One of the advantages of an FHA loan is that it typically allows borrowers with lower credit scores to qualify. In our experience, most lenders require a minimum of 580–640 credit score in order to qualify for the low down payment. Although the more creditworthiness you have, the better your interest rate typically is. The minimum down payment requirement for an FHA loan is 3.5% of the purchase price. FHA loans must meet specific safety requirements, including adequate heating, functioning utilities, and structural integrity. The FHA requires a home appraiser to assess the property’s condition and value, ensuring it meets their guidelines.

Next up for our honorable veterans is the VA loan. The U.S. Department of Veterans Affairs backs VA loans and offers a range of benefits, including no down payment or mortgage insurance requirements. You must have an honorable discharge from the military or be the surviving spouse of service members who lost their lives in the line of duty or as a result of a service-related disability to be eligible. You must also meet the minimum service years required. You may check your eligibility and request your certificate of eligibility (“COE”) at Unlike some other mortgage programs, VA loans do not require private mortgage insurance (PMI). This can result in significant savings for borrowers. Instead of PMI, VA loans have a funding fee, which is a one-time fee based on the loan amount and military service category. While lenders will consider your credit history, there is no specific minimum credit score requirement mandated by the VA. Instead, lenders will evaluate your overall creditworthiness and consider factors such as payment history, debt-to-income ratio, and employment stability.  Similar to an FHA Loan the VA has an inspection completed a safety inspection, and a wood-destroying organism inspection to ensure the home is a safe and sound investment. This loan expresses gratitude to our brave servicemen and women, allowing them to embark on their homeownership journey with ease and support.

One of the most appealing features of USDA Rural Development loans is the ability to finance the entire purchase price of the home without requiring a down payment. This 100% financing option can make homeownership more accessible for those who may not have significant savings for a down payment. These loans are available for properties located in designated rural areas, have income limits to benefit low- to moderate-income households, require your primary residence, and cannot be used for income-generating activities or rental properties.

Navigating this maze of mortgage options can be challenging. That’s why NWALook advises seeking the guidance of a mortgage professional. These experts can assess your financial situation, discuss your goals, and help you uncover the ideal mortgage that aligns with your needs. Their insights and expertise will provide the clarity and confidence necessary to make an informed decision. Contact NWALook to connect you with a few local lenders.

All information is subject to change and we always recommend verifying details with your local lender.


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