Conventional vs. FHA
These are the two most common loan products. The differences between the two are centered around their qualification requirements. Here are the basics.
Conventional loans require you to have at least a 620 credit score and a minimum down payment of 3%. FHA loans typically allow you to have a low as a 580 credit score (hard to find now due to coronavirus pandemic) and 3.5% down payment. The FHA is best for first time home buyers who may not have a ton of money or great credit.
Terms
The majority of homebuyers get a mortgage loan to buy. Usually these loans are available at 15, 20 or 30 year terms. The longer the term, the lower your monthly payment. Shorter terms usually mean less interest payments over the life of the loan.
Fixed vs. Adjustable Rates
Fixed rates mean just that. They are fixed and will not change for the life of the loan. Adjustable rates, adjust. They can go up or down depending on the market rates.
Debt-To-Income- Ratio
This is a calculation of your monthly debt expenses divided by your monthly income. Your debts can include a car payment, student loans and credit card payments. Lenders have different requirements for this ratio. But in general, the lower the better. Under 50% is ideal.