Loan programs

A conventional loan is any mortgage not insured or guaranteed by a government agency. Most conform to Fannie Mae and Freddie Mac guidelines, which is what makes them widely available and competitively priced.

Because they are not government-backed, pricing is driven heavily by credit score and loan-to-value. Small improvements in either can move your cost meaningfully, which is worth knowing before you lock anything in.

Conventional mortgage insurance is not permanent. Once you reach sufficient equity it can be removed, unlike FHA's mortgage insurance premium, which stays for the life of most loans.

There is also more than one way to structure it — monthly, single-premium, or lender-paid. Which one is cheapest depends on how long you actually plan to keep the loan.

HomeReady and Home Possible are conventional programs built for lower- and moderate-income borrowers, with reduced mortgage insurance and down payments starting at 3%.

Down payment assistance can often be layered on top. Eligibility is usually tied to income limits and the census tract of the property rather than to first-time buyer status alone.

FHA loans are insured by the Federal Housing Administration. That insurance is what lets lenders accept lower credit scores and smaller down payments than they otherwise would.

The tradeoff is mortgage insurance: an upfront premium financed into the loan, plus an annual premium collected monthly. On most FHA loans that annual premium does not fall off, which is the single most important thing to understand before choosing FHA over conventional.

The headline is 3.5% down, and there is a lower tier that allows financing with a larger down payment for borrowers further down the credit scale. Lender overlays vary, so two lenders can quote the same borrower very differently.

FHA also allows the entire down payment to come from a documented gift, which is often the deciding factor for buyers with income but no accumulated savings.

FHA loans are assumable. If rates rise, a future buyer may be able to take over your existing loan and its rate — a real asset when you sell.

FHA also offers a streamline refinance that reduces documentation when you are lowering your rate or payment, which keeps the door open if pricing improves.

A VA loan is guaranteed by the Department of Veterans Affairs. That guarantee replaces both the down payment and the monthly mortgage insurance that every other low-down-payment program requires.

In place of monthly mortgage insurance there is a one-time funding fee, which can be financed into the loan. Veterans receiving VA disability compensation are exempt from it entirely.

Eligibility comes from your service record and is documented with a Certificate of Eligibility. Surviving spouses may also qualify.

The benefit is not one-and-done. Entitlement is restored when a VA loan is paid off, and in some cases a second VA loan can be held at the same time.

The Interest Rate Reduction Refinance Loan — IRRRL — is a streamlined refinance of an existing VA loan with reduced documentation and, in most cases, no appraisal.

VA also permits a cash-out refinance, which can be used to move an existing conventional or FHA loan onto VA terms.

Non-QM simply means the loan sits outside the Qualified Mortgage box defined after 2008. It is not subprime and it is not a last resort — it is a different documentation standard.

These loans are held by portfolio lenders and private investors rather than sold to Fannie or Freddie, which is what gives them room to underwrite the borrower in front of them.

A DSCR loan qualifies the property, not you. The lender compares the rent the property produces to the payment it would carry, and if the ratio works, the file works.

No tax returns, no W-2s, no debt-to-income calculation on your personal side. For investors whose returns show heavy depreciation, this is frequently the only path that reflects reality.

Bank statement programs average deposits over 12 or 24 months to establish income, which avoids being penalized for the write-offs that make good tax strategy.

There are also 1099-only, profit-and-loss, and asset depletion programs. Which one produces the best qualifying income varies a lot by business, and it is worth running more than one.

A HELOC is a revolving line: you draw against it, pay it down, and draw again during the draw period. The rate is typically variable, which makes it well suited to short-horizon needs.

A HELOAN is a fixed-rate second mortgage funded as a lump sum with a fixed payment. When you know exactly what you need and want payment certainty, the fixed loan is usually the better instrument.

An enormous share of homeowners hold first mortgages at rates well below current market. Refinancing that first mortgage to pull cash out means giving up the low rate on the entire balance.

A second lien leaves the first mortgage untouched and prices only the new money. For most borrowers in that position, the blended cost is dramatically lower than a cash-out refinance.

Second-lien underwriting is generally faster than a first mortgage, and several programs use automated valuation rather than a full appraisal.

Closing costs are typically much lighter than a first-mortgage refinance, and several lenders absorb them entirely.

A reverse mortgage lets homeowners 62 and older convert part of their equity into cash. Rather than making payments to the lender, the balance grows over time and is settled when the home is sold or the last borrower permanently leaves it.

You keep title the entire time. The obligations that remain are the ones you already have as a homeowner: property taxes, insurance, and maintenance.

HECM reverse mortgages are non-recourse loans insured by FHA. If the balance ever exceeds what the home sells for, the insurance covers the difference — neither you nor your heirs owe it.

Heirs keep any remaining equity when the home is sold, and have the option to pay off the balance and keep the property.

Every reverse mortgage borrower must complete independent counseling with a HUD-approved agency before an application can proceed. This is a consumer protection, and it is not optional.

It is also a genuinely useful session. Bring your questions to it.

A refinance that lowers your payment and a refinance that gets you out of debt faster are opposites — one extends the term, the other compresses it. Naming the goal first prevents an expensive mismatch.

The honest version of this conversation sometimes ends with "don't refinance yet." That is a legitimate outcome and you should expect to hear it when it is true.

Every refinance has costs, whether you pay them at closing, roll them into the balance, or absorb them through pricing. The number that matters is how long it takes the savings to cover them.

If you are likely to sell or refinance again before that point, the refinance loses money regardless of how good the rate looks.

If your existing first mortgage carries a low rate, a cash-out refinance reprices your entire balance to today's market just to access a fraction of it.

In that situation a second lien is almost always cheaper in total interest. Run both before committing to either.

Revolving credit routinely carries rates several times higher than mortgage debt. Moving a balance from one to the other can cut the interest cost sharply and free up meaningful monthly cash flow.

The effect on your credit profile is often positive as well, since revolving utilization is weighted heavily and consolidating drives it toward zero.

Consolidation converts unsecured debt into debt secured by your home. That is the entire mechanism behind the lower rate, and it is a real change in risk.

It also re-amortizes short-term balances over a much longer schedule. A lower payment can still mean more total interest if the term stretches far enough — that comparison should be on the table before you sign.

Consolidation solves a balance, not a pattern. The borrowers this works best for are the ones who close or freeze the accounts they just paid off.

If the balances rebuild, you end up carrying both the consolidated debt and the new revolving debt — the worst of both structures.

A pre-approval tells you what you can actually buy and tells sellers you are real. In a competitive market an offer without one is frequently not read.

It also surfaces problems while they are still fixable. Finding a credit reporting error in week one is very different from finding it three days before closing.

VA and USDA allow zero down for eligible buyers. FHA starts at 3.5%. Conventional programs start at 3%. Down payment assistance can cover part or all of what remains.

Most assistance programs are tied to income limits and the property's location rather than to first-time status alone, which means more buyers qualify than assume they do.

Closing costs, prepaid taxes and insurance, and reserves all sit alongside the down payment. Seller credits and lender credits can offset them, and both are negotiable.

Then there is the part nobody quotes: maintenance. Build it into the number you are comfortable with, not the number you technically qualify for.