Where your loan comes from shapes the down payment, the credit rules and the cost; the rate type, the length of the loan, points and mortgage insurance shape the rest. Here is how to weigh each one.
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Fidelity Residential · NMLS #103098 · Equal Housing Lender
Fannie Mae and Freddie Mac do not lend to you directly. They buy loans from lenders, which keeps money available for new loans.
A loan that follows Fannie Mae or Freddie Mac rules and is not insured by the government. It can buy a main home, a second home or a rental, with a fixed or an adjustable rate. Some programs for first-time and lower-income buyers allow a smaller down payment. With a smaller down payment the loan usually carries private mortgage insurance.
Fixed rate loansFor a loan larger than the conforming limit set each year for the county. Each program sets its own rules for the down payment, credit and the savings you keep after closing, and the rules tighten as the loan grows. Most programs ask for full income documents, and larger loans may need two appraisals.
About jumbo loansHelp with the down payment may also be available. See down payment assistance.
Made by a private lender and insured by the Federal Housing Administration. FHA loans accept smaller down payments and lower credit scores than most conventional loans. The home must be your main residence. You pay an upfront mortgage insurance premium, usually added to the loan, and an annual premium paid monthly.
About FHA loansFor eligible veterans, service members, Reserve and National Guard members and certain surviving spouses. The loan is made by the lender and partly guaranteed by the Department of Veterans Affairs. There is no down payment in most cases and no monthly mortgage insurance.
About VA loansGuaranteed by the U.S. Department of Agriculture to help low- and moderate-income households buy a modest home in an area USDA maps as rural. The loan can cover the full appraised value.
About USDA loansIf your tax returns do not show your real income, there are programs that look at bank statements or assets instead. They have their own rules; ask a loan officer whether one fits.
Alternative documentation loansFHA accepts lower credit scores than most conventional loans, and some programs outside the standard rules consider a recent credit event, usually with a larger down payment and a higher cost.
What if my credit is not perfect?Finance a rental with a standard mortgage, or qualify on the property's own rent with a DSCR loan for business purposes.
Investment property loansThe rate is set when you close and does not change, so principal and interest stay the same for the life of the loan.
Fixed rate loansThe rate is fixed for a set number of years and then can change at set times, within caps, so the payment can rise. It can suit you if you expect to sell or refinance before the fixed period ends.
Adjustable rate loansA shorter loan has a higher monthly payment but less interest paid over its life; a longer loan has a lower monthly payment but more interest paid overall.
Your Loan Estimate shows both, so you can compare. See does a zero-point, zero-fee loan really exist?
You pay a fee at closing to lower the rate. It pays off if you keep the loan long enough to earn the cost back through the lower payment.
The lender pays some or all of your closing costs in exchange for a higher rate. It can make sense if you expect to sell or refinance in a few years, or if cash for closing is short.
With a smaller down payment, a conventional loan usually carries private mortgage insurance. As you pay the loan down, or if the home gains value, you may be able to have it removed, or to refinance into a loan without it.
FHA mortgage insurance follows FHA's own rules. With a larger down payment it ends after a set number of years; with a smaller one it lasts for the life of the loan, and refinancing into a different loan later is one way some owners remove it.
Be careful with that plan. Rates may be higher when you want to refinance, your situation may change, and a refinance has costs. Choose an adjustable rate only if you can manage the payment it could reach.
Work out how long it takes to earn the cost of the points back through the lower payment. If you expect to keep the loan longer than that, points can pay off; if not, a lender credit or no points usually costs less.
No. The costs are paid through a higher rate, so you pay them over time. Check that they are covered by a lender credit and not added to your loan amount.
Talk it through with a licensed loan officer, get a quote, or apply online.
This page is general information, not a commitment to lend. Programs, terms and eligibility depend on credit, income, property and underwriting review and are subject to change without notice.