Loan Programs
Home Purchase Options
Choosing the right mortgage program is one of the most important steps in your home-buying journey. Different loan products are designed to fit different financial situations, credit histories, and career backgrounds.
Below is an overview of the four main mortgage loan programs to help you understand which option might be the best fit for your next home purchase.
1. Conventional Loans
Conventional loans are traditional mortgages not insured or guaranteed by the federal government. Instead, they conform to guidelines set by Fannie Mae and Freddie Mac. They are often considered the "standard" mortgage choice for buyers with solid credit and stable finances.
Best For: Borrowers with good-to-excellent credit and steady employment history.
Down Payment: As low as 3% for first-time home buyers (though putting down 20% allows you to avoid mortgage insurance entirely).
Credit Score Requirements: Generally, a minimum credit score of 620 is required, though better rates and terms are unlocked with higher scores.
Mortgage Insurance: If you put down less than 20%, you will pay Private Mortgage Insurance (PMI). However, unlike government-backed loans, PMI automatically drops off once you reach 22% home equity.
Loan Limits: Capped at specific county limits (the baseline conforming limit for a single-family home is $832,750), with higher maximums allowed in designated high-cost areas.
2. FHA Loans
Backed by the Federal Housing Administration, FHA loans are designed to help buyers who might not have flawless credit or a large savings account for a down payment. They are especially popular among first-time home buyers.
Best For: First-time buyers, those with lower credit scores, or buyers with modest savings.
Down Payment: 3.5% for borrowers with a credit score of 580 or higher. If your score falls between 500 and 579, a 10% down payment is required.
Credit Score Requirements: Highly flexible, accepting scores down to 500 (with stricter terms).
Mortgage Insurance: FHA loans require two types of mortgage insurance: an Upfront Mortgage Insurance Premium (UFMIP) paid at closing (or rolled into the loan) and an Annual Mortgage Insurance Premium (MIP) built into your monthly payment. For minimum down payment options, the annual MIP typically lasts for the entire life of the loan.
Property Standards: The home must be a primary residence and pass a strict FHA appraisal checking for safety, security, and structural integrity.
3. VA Loans
Guaranteed by the Department of Veterans Affairs, VA loans are an incredible benefit exclusively available to active-duty service members, veterans, and eligible surviving spouses.
Best For: Eligible military members and veterans looking to buy a primary home with maximum purchasing power.
Down Payment: 0% down payment required for most qualified borrowers with full entitlement.
Credit Score Requirements: The VA itself does not set a hard minimum credit score, though individual lenders usually look for a score of 620 or higher.
Mortgage Insurance: No monthly mortgage insurance is required—one of the biggest financial advantages of the program. Instead, buyers pay a one-time VA funding fee (which can be financed into the loan), though disabled veterans are often exempt from this fee.
Debt-to-Income (DTI): VA underwriting places a heavy emphasis on "residual income" (the cash you have left over each month after paying major expenses) alongside standard debt ratios.
4. USDA Loans
Backed by the U.S. Department of Agriculture, USDA loans (also called Rural Development loans) are designed to promote homeownership in qualifying rural and suburban areas. Despite the name "rural," many growing outer-ring suburbs and small towns actually qualify.
Best For: Moderate- to low-income buyers looking to purchase homes in designated rural or suburban areas.
Down Payment: 0% down payment, making it another true zero-down option.
Credit Score Requirements: Typically requires a minimum credit score of 640, though manual underwriting can sometimes accommodate lower scores with extra documentation.
Location & Income Limits: Properties must be located within USDA-eligible geographic boundaries. Additionally, household income cannot exceed specific limits (typically capped at 115% of the median income for the local area).
Fees: USDA loans require an upfront guarantee fee and an annual fee, which function similarly to mortgage insurance but are often lower than FHA costs.
Non-QM Loans
Alternative Lending Solutions
Non-QM (Non-Qualified Mortgage) loans fill the gap left by traditional underwriting guidelines. They are tailored for creditworthy borrowers whose financial profiles—such as business owners, real estate investors, or individuals with complex income structures—do not fit neatly into standard Fannie Mae or Freddie Mac boxes.
Below is an overview of the key Non-QM mortgage programs available to help you find the right financing solution.
1. Bank Statement Loans
Ideal for self-employed individuals and business owners whose tax returns show low net income due to write-offs.
How It Works: Income is calculated using 12 to 24 months of personal or business bank statements instead of traditional W-2s or tax returns.
Best For: Freelancers, consultants, small business owners, and entrepreneurs.
Key Advantage: Recognizes true cash flow rather than taxable net income.
2. Debt-Service-Coverage Ratio (DSCR) Loans
Designed specifically for real estate investors looking to scale portfolios without relying on personal income verification.
How It Works: Qualification is based strictly on the property's rental income compared to the monthly mortgage payment (PITIA). No W-2s or tax returns are needed.
Best For: Buy-and-hold residential real estate investors.
Key Advantage: Scale unlimited investment properties based on asset performance, bypassing personal debt-to-income (DTI) limits.
3. Profit & Loss (P&L) Statement Loans
An alternative documentation program utilizing a CPA- or tax-professional-prepared profit and loss statement for self-employed professionals.
How It Works: Uses a recent P&L statement covering 12 to 24 months, verified and signed by a licensed tax professional or accountant.
Best For: Established business owners with clean accounting books who haven't filed current-year taxes yet.
Key Advantage: Bypasses the need for full business and personal tax returns.
4. 1099 Income Loans
Streamlined verification tailored for independent contractors, gig-economy workers, and commission-based professionals.
How It Works: Uses 1 or 2 years of 1099 forms combined with year-to-date earnings to calculate qualifying income.
Best For: Independent contractors, 1099 employees, and high-earning freelancers.
Key Advantage: Avoids complex tax returns and corporate write-off penalties.
5. Asset Depletion Loans
Leverages large liquid assets or investment portfolios to generate a qualifying monthly income figure.
How It Works: Liquid assets (stocks, bonds, retirement accounts, cash reserves) are divided over a set term (e.g., 240 or 360 months) to create a steady qualifying income stream.
Best For: Retirees, high-net-worth individuals, tech founders, and affluent buyers with substantial assets but low reported annual income.
Key Advantage: Unlocks high purchasing power without forcing you to liquidate your investments.
6. Foreign National Loans
Tailored financing solutions for non-U.S. citizens living abroad or visiting who want to purchase property in the U.S.
How It Works: Uses international credit reports, foreign bank statements, or letters of employment from abroad instead of traditional U.S. credit and tax history.
Best For: International investors and vacation-home buyers.
Key Advantage: Opens up U.S. real estate markets to buyers without a Social Security Number or U.S. credit profile.
7. No-Ratio & ATR (Ability-to-Repay) Flexible Loans
Programs designed for unique situations where standard income calculations or DTI ratios do not apply or would otherwise restrict approval.
How It Works: No-Ratio loans do not factor in a debt-to-income calculation at all, relying instead on high credit scores, significant down payments, and deep reserves. ATR flexible solutions look holistically at overall asset strength.
Best For: High-net-worth buyers with complex, multi-source income streams.
Key Advantage: Maximum underwriting flexibility when rigid formulas fail.
Equity Solutions
When homeowners want to leverage their accumulated property value, restructure their existing mortgage debt, or transition from one property to another, equity and refinance solutions provide the necessary financial flexibility.
Below is an overview of the four primary equity and refinance products to help you guide clients through their options.
1. Home Equity Line of Credit (HELOC)
A HELOC functions like a revolving line of credit (similar to a credit card) using your home equity as collateral. It gives homeowners the flexibility to borrow money on an as-needed basis over a specific timeframe.
How It Works: Lenders typically allow you to borrow up to 80% to 85% of your home's appraised value, minus your remaining first mortgage balance. It features a draw period (usually 10 years, where you can borrow and make interest-only payments) followed by a repayment period (typically 15 to 20 years, where principal and interest are repaid).
Interest Rate: Usually variable, fluctuating alongside the prime rate.
Best For: Ongoing expenses, home improvement projects spanning several months, consolidating high-interest credit cards, or establishing a safety net of emergency cash.
Key Advantage: You only pay interest on the exact amount of money you actually draw down, rather than the entire credit limit.
2. Home Equity Loan (HELOAN)
Often referred to as a "second mortgage," a HELOAN provides a one-time, lump-sum payout of cash backed by your home's equity.
How It Works: Like a HELOC, your borrowing limit is determined by your home equity (usually capped at 80%–90% combined loan-to-value). However, instead of an open line of credit, you receive the full cash amount upfront at closing and immediately begin paying it back in fixed monthly installments.
Interest Rate: Typically fixed, providing predictable, stable monthly payments over terms usually ranging from 5 to 30 years.
Best For: Large, one-time expenses (such as a major roof replacement, a specific medical bill, or paying off a large chunk of high-interest debt all at once).
Key Advantage: Fixed rates protect you from market volatility, making budgeting simple and straightforward.
3. Bridge Loans
A short-term, transitional financing option designed to help homeowners "bridge" the financial gap between buying a new home and selling their current one.
How It Works: The lender uses the equity in your current, unsold home to provide a short-term loan (usually lasting 6 to 12 months). This cash can be used as a heavy down payment on your next home, allowing you to make a competitive offer without being contingent on the sale of your existing property.
Interest Rate: Typically higher than standard long-term mortgage rates, often with additional setup or origination fees.
Best For: Move-up buyers who have found their dream home before successfully selling their current property.
Key Advantage: Eliminates the stress of a home-sale contingency and prevents you from having to temporarily move into a rental or storage unit while waiting for your old home to close.
4. Mortgage Refinance
Refinancing replaces your current home loan with an entirely new mortgage—ideally with better terms, a lower interest rate, or a restructured timeline. There are two primary categories:
Rate-and-Term Refinance: Swapping your existing mortgage for a new one to secure a lower interest rate, shorten your loan term (e.g., dropping from a 30-year to a 15-year fixed), or switch from an adjustable-rate mortgage (ARM) to a fixed-rate loan.
Cash-Out Refinance: Replacing your current mortgage with a larger loan amount, drawing out a portion of your accumulated equity in cash at closing to use for renovations, debt consolidation, or other investments while keeping a single monthly mortgage payment.
Best For: Lowering monthly housing costs, locking in better long-term structures, or accessing large pools of cash while keeping a single monthly bill.
Key Advantage: Avoids taking on a separate second lien (like a HELOC or HELOAN), consolidating all your housing debt into one simplified monthly payment.