Homeownership is not exclusive to high-income earners. The first step is to work with a lender and hash out the complex financial details.
Pre-qualification
1. Pick a loan term
Short-term loans can mean higher monthly payments but a lower total cost over the loan term. Long-term loans may mean lower monthly payments but greater interest payments over the term.
2. Pick an interest rate
Fixed-rate home loans are less risky because the interest rate remains the same throughout the loan term. Adjustable-rate loans can offer a lower initial interest rate but adjust to fluctuations in the market.
3. Pick a loan type
Conventional • Not guaranteed by the U.S. government • Conform to Fannie Mae and Freddie Mac (Fannie Mae and Freddie Mac are U.S.-sponsored mortgage securities dealers) • Less money on mortgage insurance, fewer steps to closing • $424,100 loan limit FHA • Guaranteed by the Federal Housing Authority • Option for first-time homebuyers • Available to lower credit borrowers • Available to borrowers with smaller down payments • Loan limits vary by county VA • Guaranteed by the U.S. Department of Veterans Affairs • Eligible veterans, service members, surviving spouses • No down payment required • No mortgage insurance • Capped closing costs USDA • Guaranteed by the U.S. Department of Agriculture • Designed for low- to moderate-income borrowers • Must meet property eligibility requirements • Up to 38-year loan term • No down payment required
