There are many types of home loans. Each has different requirements, interest rate ranges and benefits. The two main categories of mortgages are conforming loans and non-conforming loans. Non-conforming loans include government-backed, jumbo and non-prime mortgages.
Here are some common mortgage types:
Conventional Conforming Loans
A conventional loan is a loan that’s not insured by the federal government. Most conventional loans are conforming loans. “Conventional” means a lender is issuing a loan without a government agency’s guarantee. “Conforming” means the mortgage meets the requirements set by Fannie Mae and Freddie Mac – two government-sponsored enterprises that buy loans to keep mortgage lenders liquid so they have enough capital to continue lending to borrowers.
Conventional loans are a popular choice among buyers. Depending on your finances, homeownership history, and credit score, you may be able to get a conventional loan with a 3% down payment, which can get you into a home sooner. But you should also factor in the monthly cost of private mortgage insurance because you put less than 20% down.
Many lenders also offer government-backed mortgages. Government-backed home loans are especially attractive to first-time and low- to moderate-income borrowers and borrowers with smaller savings and credit issues.
FHA Loans
FHA loans are backed by the Federal Housing Administration. They’re popular because they have low down payment and credit score requirements. You can get an FHA loan with a 3.5% down payment and a 580 credit score.
The FHA promises to reimburse lenders when a borrower defaults on their loan, sharing the risk lenders assume when issuing a loan. The guarantee encourages lenders to make these loans available to borrowers with lower credit scores and smaller down payments.
VA Loans
VA loans are backed by the Department of Veterans Affairs. It’s a home buying benefit for qualified active-duty military members, reservists, National Guard members, veterans and their surviving spouses.
VA loans are a great option because, if you qualify, you can buy a home for 0% down, and you won’t pay mortgage insurance.
USDA Loans
USDA loans* are backed by the U.S. Department of Agriculture. The loan only applies to homes in USDA-approved rural and suburban areas. To qualify for a loan, a borrower’s household income can’t exceed 115% of an area’s median income.
You can buy a home for 0% down, and for some borrowers, the USDA’s required guarantee fee will cost less than the FHA mortgage insurance premium.
*Rocket Mortgage doesn’t offer USDA loans at this time.
Conforming mortgages are subject to lending limits. In 2024, the conforming loan limit in most of the U.S. is $766,550. In high-cost housing areas, the limit is as high as $1,149,825. If you want to buy a house that costs more than that and need financing, you’ll apply for a jumbo loan.
Because jumbo mortgages exceed conforming loan limits and aren’t backed by government agencies, they’re considered conventional non-conforming loans. A jumbo loan typically requires at least a 20% down payment and tons of paperwork for approval.
Rocket Mortgage offers the Jumbo Smart loan. You can borrow up to $3 million with a Jumbo Smart loan.
A mortgage is a loan you get from a lender to finance a home purchase. When you take out a mortgage, you promise to repay the money you've borrowed at an agreed-upon interest rate. The home is used as collateral.
A mortgage is a type of loan used to purchase or maintain a home, plot of land, or other types of real estate. The borrower agrees to pay the lender over time, typically in a series of regular payments that are divided into principal and interest. The property then serves as collateral to secure the loan.
Getting a mortgage can be a challenge, even in the best of times, with piles of required documentation, repeated verifications of things like employment and assets, and very strict rules about how much debt you can carry.
Government-backed loan options, such as FHA, USDA and VA loans, are typically the easiest type of mortgage to get because they may have lower down payment and credit score requirements compared to conventional mortgage loans.
There are no specific income requirements to qualify for a mortgage. Lenders use your debt-to-income (DTI) ratio to compare income versus your total debt with the mortgage to determine whether you'll qualify for the loan.
The minimum credit score needed for most mortgages is typically around 620. However, government-backed mortgages like Federal Housing Administration (FHA) loans typically have lower credit requirements than conventional fixed-rate loans and adjustable-rate mortgages (ARMs).
A full service bank ensures your loan will stay with the same company for the entire term. Do be sure to make sure that the bank does service their own loans. On the other hand, a mortgage company can offer fast closings, product availability, and loan originator expertise.
Although your credit might take a temporary hit when you get your mortgage, over time, paying down the balance can help improve or maintain your credit score. A higher credit score translates to everything from better interest rates to more loan options.
A mortgage can typically be as long as 30 years and as short as 10 years. Short-term mortgages are considered mortgages with terms of ten or fifteen years. Long-term mortgages usually last 30 years.
When you purchase a home via a mortgage loan, as a borrower, you are, in fact, a homeowner free to make decisions pertinent to the property (decor, renovations, construction, landscaping and so on). Even so, do you actually own the home you were lent money to purchase? Simply put, yes; you do own your home.
How long does a mortgage application take? A mortgage application typically takes two to four weeks to process. Factors such as the how busy the lender is, how straightforward your circ*mstances are and how quickly you respond to any requests can influence how long it takes for a mortgage to be approved.
Lenders will calculate your debt-to-income ratio (DTI) to make sure that you have adequate monthly income to cover your house payment, in addition to other debts you might have. If your DTI is too high or your income isn't substantial enough to prove you can handle the monthly payments, you'll be turned down.
Several factors could keep you from getting a mortgage, including a low credit score or income, high debts, a spotty employment history and an insufficient down payment.
From application to approval and closing, getting a mortgage can take anywhere from 30 days to 60 days. However, some home purchases can take longer, depending on factors unique to the purchase transaction and the home loan processing time.
What is the minimum deposit for a mortgage? The minimum deposit you need for a Nationwide mortgage is 5% of the property price, which would be a 95% mortgage. Eligibility criteria applies.
Before underwriting, a loan officer or mortgage broker collects credit and financial information for your application. The lender's underwriting department then verifies your identity, checks your credit history and assesses your financial situation, including your income, cash reserves, investments and debts.
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