A Simple Guide to Choosing the Right Home Loan

A Simple Guide to Choosing the Right Home Loan

Buying a home is exciting, but figuring out how to pay for it can be confusing. With so many different loan names and acronyms, it’s hard to know where to start.

At TVFCU, we believe you shouldn’t need a finance degree to buy a house. This guide breaks down your options into simple terms to help you decide what fits your life and your budget.

How Do Mortgage Loans Actually Work?

Before looking at specific loans, it helps to know what changes your monthly payment. Generally, three main things determine what you qualify for:

• Interest: The interest is the cost of borrowing the money.
• Interest Rate: the percentage of the principal amount that a lender charges as interest to the borrower, for the use of their money.
• Loan size: Does the amount you want to borrow fit within standard limits?
• Mortgage Insurance: Different programs and different down payments impact if you need mortgage insurance and how much it costs each month.

“I Want a Standard Loan”

Conventional Loans- Fixed-rate or Adjustable-rate

This is the most common type of mortgage. It is usually the lowest-cost option if you have a strong credit history.

• Who is it for? People with good credit scores.
• The Perks: You can choose terms ranging from 10,15, 20, or 30 years.
• Down Payment: You generally need a minimum 3% down.
• Good to know: If you put 20% down, you don’t have to pay for mortgage insurance.

Fixed-Rate Loans

This isn’t a specific “program,” but a way your interest works. With a fixed rate, your interest rate and monthly payment never change.

• Who is it for? People who plan to stay in their home for a long time and want a predictable bill every month.
• The Perks: You are protected if market rates go up in the future.

“I Don’t Have a Big Down Payment”

If you haven’t saved up a huge pile of cash, you still have great options.

FHA Loans

These loans are backed by the government and are very popular for first-time buyers.

• Who is it for? Borrowers who need help with low-income, have a lower down payment and need flexible credit requirements.
• The Perks: You can put down as little as 3.5%.
• Good to know: Because the down payment is lower, you will have to pay for mortgage insurance.

VA Loans

If you are active-duty or have served in the military, this is often your best option.

• Who is it for? Veterans, active-duty military, and eligible surviving spouses.
• The Perks: Usually requires $0 down payment, have lower interest rates and no mortgage insurance.

USDA Loans

This is a program designed to help people buy homes in rural areas or qualifying suburbs.

• Who is it for? Low-to-middle income households looking to buy outside the city. Household income must meet specific guidelines and be in an eligible rural area.
• The Perks: Offers affordable 30-year terms and 100%financing-Zero down payment required for eligible buyers.

“I Need Something Flexible or Custom”

Adjustable-Rate Mortgage (ARM)

Unlike a fixed rate, an ARM usually starts with a lower interest rate for a set number of years (like 5 or 7 years), making it cheaper at the beginning.

• Who is it for? People who don’t plan to stay in the house forever, or who expect their income to go up soon.
• Perks: lower initial rate, short-term flexibility, lower monthly payment, flexible refinancing options.
• The Risks: After the fixed period ends, your interest rate (and payment) can jump. If the market rises, your rate rises with it.

Portfolio Loans (TVFCU)

These are typically offered by smaller lenders or credit unions.

Who is it for? People with unique financial situations, like self-employment or unique properties, where a standard bank loan might say “no.”

• Perks: They are not sold, may have more flexible underwriting requirements.

Jumbo Loans

Conventional loans have a limit on how much you can borrow (usually around $832,750). If you need more than that, you need a Jumbo loan.

• Who is it for? Buyers purchasing high-value luxury homes.
• Good to know: These usually require higher credit scores and more cash reserves.

“I Want to Build or Renovate”

Construction to Permanent Loans

This loan combines the financing to build the house and your permanent mortgage into one single package.

• The Perks: You only have to pay closing costs once. You typically make interest-only payments while the house is being built.

Home Equity Loans / HELOC

If you already own a home, these let you borrow against the value of your house to get cash for repairs or other goals.

• How it works: You can get a lump sum of cash, or a “line of credit” (HELOC) that you can draw from when you need it.

Still Not Sure? Let’s Compare.

If more than one of these sounds like a good fit, don’t guess. TVFCU offers a full menu of products, giving you more choices.

Our loan officers can look at your budget and credit score, compare the loans side-by-side, and show you exactly what your monthly payment would look like for each one.

Ready to see what you qualify for? Contact a TVFCU loan officer today. 

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