Understanding Mortgage Options

Home financing can take many forms. What may be available depends on individual circumstances and the purpose of the loan.

The overview below introduces several common types of mortgage financing. A qualified lender can explain current requirements, costs, and terms and help identify which options may be appropriate for you.

Conventional mortgages

Conventional mortgages are not insured by a federal government agency. They are commonly used to purchase or refinance a home, and some programs may offer relatively low down-payment options for eligible borrowers.

Requirements vary based on the borrower, property, loan purpose, and underwriting process.

FHA loans

FHA loans are mortgages insured by the Federal Housing Administration and issued through approved lenders. They may offer lower down-payment requirements than some conventional options.

FHA mortgage insurance and other program requirements apply.

VA loans

VA-backed home loans are available to eligible veterans, service members, and certain surviving spouses.

Some qualifying borrowers may be able to finance a purchase without a down payment, although lenders still evaluate income, credit, and the ability to repay. Eligibility must be established through the U.S. Department of Veterans Affairs.

USDA loans

USDA home-loan programs may provide no-down-payment financing for qualifying borrowers purchasing eligible properties in rural areas.

Household income, property location, occupancy, and other program requirements apply. USDA guaranteed loans are obtained through approved participating lenders.

Renovation financing

Renovation financing can allow eligible borrowers to include certain repair or improvement costs within a home loan.

FHA’s 203(k) program, for example, can combine the purchase or refinancing of an eligible property with funds for rehabilitation. Different program options are available depending on the scope of the work, and specific documentation and completion requirements apply.

Jumbo loans

Jumbo loans are mortgages that exceed the conforming loan limits established for loans purchased by Fannie Mae and Freddie Mac.

Those limits are updated annually and may be higher in designated high-cost areas. Because jumbo loans fall outside conforming limits, qualification standards and pricing may differ by lender.

Refinancing

Refinancing replaces an existing mortgage with a new loan. A homeowner may consider refinancing to seek different terms or access a portion of the equity in the property.

Refinancing generally involves closing costs and can affect the total cost of borrowing. A cash-out refinance also increases the mortgage balance by converting part of the home’s equity into borrowed funds.

Home equity loans and HELOCs

Homeowners may be able to borrow against the equity in their property through a home equity loan or home equity line of credit.

A home equity loan generally provides a specific amount upfront. A HELOC is a revolving line of credit that allows borrowing over time, subject to its terms and limits. Both use the home as collateral and may function as second mortgages when an existing first mortgage remains in place.

Construction-to-permanent financing

Construction-to-permanent financing begins with funding for the construction of a new residence and transitions into a longer-term mortgage once the home is completed.

Depending on the program and lender, the financing may involve one closing or separate construction and permanent-loan closings.

Investment-property financing

Mortgage financing may also be available for residential investment properties.

These loans can carry different qualification requirements from those used to purchase a primary residence. A lender may consider the property type, available reserves, potential rental income, and the borrower’s broader financial obligations.

Reverse mortgages

A reverse mortgage allows eligible older homeowners to borrow against the equity in their primary residence. The most common form is the federally insured Home Equity Conversion Mortgage, generally available to homeowners age 62 or older.

Interest and fees are added to the loan balance over time. Borrowers remain responsible for property taxes, homeowners insurance, upkeep, and maintaining the property as their principal residence. The loan generally becomes due when the home is sold or is no longer the borrower’s primary residence, subject to applicable program rules and protections.

Speak with a mortgage professional

The most appropriate form of financing will depend on your circumstances and the products currently available.

Connect with an LGBTQ+ or LGBTQ+-affirming mortgage professional through GayMortgageLoans.com to discuss your goals and better understand the possible paths forward.

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Important information

Mortgage products, eligibility requirements, rates, costs, terms, loan limits, and availability can change and may vary by lender and location. This page is provided for general educational purposes only and does not constitute financial, legal, tax, or lending advice or a commitment to lend. Consult a licensed mortgage professional about your individual circumstances.