I am always eager when I get a call from you saying, “We found a home, and it’s so great! It checks all the boxes!” I am almost too excited to tell you this next part. I say, “Will you be paying with cash, or will you be financing? If financing, we need to get you connected with a lender.” Never fear! I have a couple of great lenders who work wonders to get you in the door. One of the perks of having me as your real estate professional is that I can point you in the right direction when you aren’t sure where to start.
Some questions I might ask you: How is your credit score? Do you have any cash set aside for a down payment? What is your budget or current monthly housing expenses? What’s a realistic time frame for purchasing this home?

I know for some of you who have already purchased a home, these may be routine questions, but for a first-time homebuyer, I want to break down some financing options and how they may apply to you. Whether you’ve ever heard of conventional loans, FHA loans, USDA loans, or VA loans, I am here to help explain a little further.

A government-backed mortgage is a loan offered to eligible individuals by traditional private lenders, but these loans are insured, or guaranteed, by federal agencies. This reduces risk for lenders, allowing them to be more lenient with lower credit scores and smaller or no down payments. Government-backed mortgages are often obtained through a bank or credit union but are insured by one of three federal government agencies, such as the Federal Housing Administration (FHA), U.S. Department of Agriculture (USDA), or the Department of Veterans Affairs (VA).

These loans do have different requirements and cost structures from conventional mortgages, which are the most common type of mortgage. A government loan may require fees up front and make mortgage insurance mandatory.

For example, FHA loans allow a credit score of 500 with a 10 percent down payment or a score of 580 with a 3.5 percent down payment. These loans can be used to fund both home purchases and renovations for a fixer-upper. Mortgage rates for FHA loans fluctuate with the market, like other types of loans.

USDA loans are well-known in our rural area. The USDA also offers a no-down-payment loan program. To qualify for this type of mortgage, you must buy a home in a rural area, like northern New Mexico. The USDA mortgage also has maximum income limits depending on your family size and zip code. Like other loan types, rates can vary.

VA loans, for our military families, are backed by the Veterans Administration and provide zero-down mortgages for all eligible veterans, service members, and spouses. It’s easy to compare home mortgage rates through the VA program on the web.

Within each of these types of mortgage loans, most lenders offer either fixed-rate or adjustable-rate loans. You may prefer the stability of a constant monthly payment with a fixed-rate mortgage or prioritize the low introductory payments with an adjustable mortgage, especially if you expect to increase your income over time.

Conventional loans allow you to borrow up to a certain amount with a credit score of 620 or higher. You must have a down payment of at least 3 percent. Most conventional loans have 15- or 30-year terms. Jumbo mortgages exceed the maximum amount for conventional loans. They require a higher credit score and a down payment of at least 10 percent.

Curious about buying a home and what that might look like for you? Reach out today! As always, I am happy to help.