Friday, January 31, 2025 / by Sell With Jana Caudill
Which Mortgage Option Is The Best Fit? Let Our Trusted Lender Partner Answer All Your Questions!
As you’re exploring your mortgage options, there is more than one choice. Marnie Cutrone, Senior Loan Originator with CrossCountry Mortgage, LLC shares a few of the common mortgage products available to help you make the decision that best suits your lifestyle.
1. Fixed-Rate Mortgage
This is the most traditional mortgage type, where your interest rate stays the same for the entire term of the loan— usually 15, 20, or 30 years. It provides stability and predictability since your monthly payment won’t change, even if market rates fluctuate. This is a great option if you plan to stay in your home for a long time and prefer a consistent budget.
2. Adjustable-Rate Mortgage (ARM)
An ARM offers a lower initial interest rate than a fixed-rate mortgage, but the rate can change after a set period— typically 5, 7, or 10 years. After the initial period, the rate will adjust periodically based on market conditions. This could be a good option if you plan to move or refinance before the rate adjusts, but it does carry some risk if interest rates rise.
3. FHA Loan
A Federal Housing Administration (FHA) loan is a government-backed mortgage that is ideal for first-time homebuyers or those with less-than-perfect credit. The down payment can be as low as 3.5%, making it easier for buyers to get into a home. Keep in mind that there are mortgage insurance costs associated with FHA loans.
4. VA Loan
If you’re a current or former service member (or the spouse of one), a VA loan could be an excellent option. It offers great benefits, such as no down payment and no private mortgage insurance (PMI), making it an affordable choice for veterans and their families.
5. Jumbo Loan
A jumbo loan is used for home purchases that exceed the conforming loan limits set by the Federal Housing Finance Agency (FHFA). Since these loans are higher than typical loan amounts, they often come with stricter credit and income requirements. However, if you're purchasing a luxury home or in a high-cost area, this could be your best option.
6. USDA Loan
A USDA loan is backed by the U.S. Department of Agriculture and is designed for homebuyers in rural and suburban areas. These loans typically require no down payment and offer competitive interest rates. They are available to buyers who meet certain income requirements and are purchasing in designated rural areas.
7. Non-QM Loans (Non-Qualified Mortgages)
Non-QM loans offer flexibility for borrowers who may not meet traditional mortgage requirements. Here are a few types of Non-QM loans you may want to consider:
Investor Cash Flow Loans / DSCR (Debt Service Coverage Ratio) Loan
Ideal for real estate investors who may not have traditional income documentation, DSCR loans focus on the income generated by the property rather than personal income. This is a great option for those purchasing investment properties.
Asset Qualifier Loan
Uses your savings, investments, or retirement funds to qualify rather than income from employment. This is ideal for individuals with significant assets but less regular income.
Bank Statement Loan
Perfect for self-employed individuals or business owners, this loan looks at your bank statements rather than tax returns to verify income, making it a great option for those with irregular income.
Foreign National Loan
For international buyers, this loan allows non-U.S. citizens to purchase property in the U.S. without needing a U.S. credit score, usually with a larger down payment.
Profit and Loss (P&L) Loan
Designed for self-employed borrowers who can provide a profit and loss statement from their business rather than traditional income documentation, such as W-2s.
8. Down Payment Assistance Programs
If you’re a first-time homebuyer, there are many state and local programs that can help with down payments. These programs offer grants, low-interest loans, or even deferred payments to make homeownership more affordable. Depending on your situation and the area you’re looking to buy, you may be able to reduce or eliminate your down payment requirement. I can help you explore which options might be available in your area.
9. First-Time Homebuyer Programs
First-time homebuyers may also qualify for special loan programs that offer lower down payments, reduced fees, or more flexible credit score requirements. Programs like the FHA loan or certain state-sponsored homebuyer assistance programs can be great options for someone purchasing their first home. These programs often have specific eligibility criteria, but they can make buying your first home more accessible.
Each of these mortgage products has unique advantages and requirements, and I’m happy to help you choose the right one based on your needs and financial situation.
If you have any questions or want to discuss which option makes the most sense for you, feel free to reach out. We are here to help guide you every step of the way.