Loan options, and what each one is for

The ordinary routes

• Conventional

  The ordinary route for buyers with reasonably settled credit and some deposit.

  Not government-insured. It follows guidelines set by Fannie Mae and Freddie Mac, which is why it behaves consistently from lender to lender.

  Below a 20% down payment it usually carries mortgage insurance — and unlike FHA, that insurance can come off once you have enough equity. Over the years that difference adds up.

• FHA

  Built for buyers with a smaller deposit or a credit history with something on it.

  Insured by the Federal Housing Administration. The minimum down payment is 3.5%, which is set by the programme rather than by a lender.

  The trade is the mortgage insurance, which on most current FHA loans stays for the life of the loan. It is often the right door in, and worth revisiting later rather than keeping forever.

• VA

  Veterans, serving members, and some surviving spouses.

  Guaranteed by the Department of Veterans Affairs. No down payment is required and there is no monthly mortgage insurance.

  The best terms in American lending, and routinely left on the table by people who are entitled to them. If you served, say so early — the eligibility paperwork takes time to retrieve.

• USDA

  Buyers in eligible rural and some suburban areas, within income limits.

  Backed by the Department of Agriculture. No down payment required.

  The eligibility is geographic and the map surprises people — parts of Florida that feel nothing like farmland qualify. Worth checking the address before assuming.

• Jumbo

  Buyers above the conforming loan limit for the county.

  Too large for Fannie and Freddie, so the lender sets its own terms and keeps more of the risk.

  Expect a closer look at reserves and income. The limit is a county figure that is revised annually, so a loan that was jumbo last year may not be this year.

• Self-employed and alternative documentation

  Business owners, contractors and investors whose tax returns understate what they actually earn.

  Programmes that qualify you on bank statements, on a profit and loss statement, on assets, or — for a rental — on what the property itself brings in.

  These exist precisely because a good accountant and a mortgage underwriter want opposite things from a tax return. The pricing reflects the extra work, and for the right borrower it is the difference between buying and not.

Questions people actually ask

• Which one is best?

  There is no best. There is the one that fits your deposit, your credit, the property and what you intend to do with the house. A programme that is right for a buyer staying thirty years is often wrong for one moving in four.

• Do I need 20% down?

  No. That belief stops more people buying than almost anything else. Several routes start far lower, and some require nothing. What the deposit changes is the cost — mortgage insurance, and the size of the loan.

• Can I use gift money?

  On most programmes, yes. It has to be documented properly: who gave it, that it is a gift rather than a loan, and a clear trail showing it arriving. Done in the right order this is routine. Done in the wrong order it causes delay.

• I am self-employed. Am I at a disadvantage?

  On a conventional file, often — because it is read from tax returns that are written to minimise profit. That is exactly what the alternative-documentation programmes are for. The disadvantage is usually in the paperwork rather than in you.

• Which one will I get?

  Nobody can tell you that from a website, including us. It depends on your credit, your income, your deposit and the property, and it needs a licensed originator to look.