Popular Loans for Buying a Home

Understanding Different Types of Home Loans

Finding a great deal on your home requires knowing the types of home loans available. Here are some common mortgage products and who they are best for.

Conventional Loan

This is the most popular type of mortgage. Many people think of this loan first when buying a home. To qualify, you usually need:

• A sizable down payment (20% is typical)

• A high credit score

• A low debt-to-income ratio

If you choose a fixed-rate conventional loan, your interest rate stays the same for the entire loan term. You can make a smaller down payment, but you may have to pay private mortgage insurance (PMI).

Adjustable Rate Mortgage (ARM)

An ARM is similar to a conventional loan but works best for buyers who plan to sell or pay off their home quickly. It starts with a lower interest rate, but the lender can raise it periodically over time (with a cap).

USDA Loan

A USDA loan is backed by the government. You don’t need a down payment or PMI. The home must be in a rural or qualifying suburban area. You also need a good credit score.

VA Loan

VA loans are available to veterans, active military members, National Guard members, and some surviving spouses. You don’t need a down payment or PMI. There is a small processing fee. VA loans have rules, such as a 60-day move-in requirement and that the home must be your primary residence.

FHA Loan

FHA loans are ideal for buyers with less money for a down payment or a lower credit score. You can put down as little as 3.5%, but you may need to pay mortgage insurance for the life of the loan.

Jumbo Loan

Jumbo loans are for very expensive homes. They have similar terms to conventional loans but allow for larger loan amounts.

Talk to your lender to see which loan fits your situation and home purchase best.