Home Purchase Loans | Traditional and Non-QM Loans

Acquiring a home is a big deal in anyone’s book, and getting your head around the options for home purchase loans is important. This guide is your go-to resource for everything you need to know about home purchase loans in 2024. We’re diving deep into the world of traditional and non-QM loans.

You’ll get the lowdown on what requirements you need to meet, the interest rates you can expect, the terms of these loans, and how to apply for them. Not stopping there, we’ll even compare and offer insights into the experience of working with Gustan Cho Associates. Additionally, we’ll walk you through how to get pre-approved and share tips on using loan calculators most effectively. We aim to provide you with a thorough understanding of home purchase loans so you feel confident as you step into the home-buying process.

Types of Home Purchase Loans

When buying a home, several types of home purchase loans are available, each with its own rules and benefits. Let’s break these down into simpler terms.

Traditional Loans

When it comes to traditional home loans, the most common type is a Conventional Loan. You usually need a credit score of at least 620 to qualify for these loans. You may need to make a down payment when buying a house, usually between 3% and 20% of the price. These loans can last for 15 or 30 years. Their interest rates can either stay the same or change over time.

When you apply for a loan, you must provide several documents, including proof of your income, assets, and employment. The amount you can borrow depends on the location of the house, but it generally goes up to about $726,200 in most areas.

FHA Loans

FHA loans are a great choice for people looking to buy a home. If your credit score is lower, around 580, you should only put down 3.5%. If your score is between 500 and 579, you’ll have to front 10%. These loans typically have lower interest rates and last 15 or 30 years. They’re pretty forgiving when it comes to your credit history and how much debt you have compared to your income. The loan limits change depending on where you live, starting at around $472,030 in less expensive areas and going up to $1,089,300 in pricier spots.

VA Loans

VA Loans are another option for those who have served in the military. These home purchase loans require a Certificate of Eligibility (COE) and come with very competitive interest rates for either 15 or 30 years. One of the biggest pluses is that you don’t need a down payment or private mortgage insurance (PMI). There’s technically no cap on how much you can borrow, but without full entitlement, the limits follow those set by the FHFA.

USDA Loans

Lastly, USDA loans fit the bill if you’re looking for a home in a less urban area. Aimed at rural properties, these mortgages are designed for purchasers with a minimum credit score of 580 and provide favorable 30-year loan terms with low interest rates. They stand out because you can finance the entire purchase price (100% financing). The limits on these loans vary depending on the area.

There you have it—a simplified look at the types of home purchase loans available for those looking to buy a new home, each catering to different needs and financial situations.

Non-QM Loans

Exploring non-QM loans can be a great alternative when you’re looking into getting a loan to buy a house but find that traditional mortgages need to fit your situation. Let’s dive into some options known as home purchase loans that cater to those with unique financial situations.

Bank Statement Loans

These home purchase loans are great for self-employed individuals. You can use your bank statements to show your income instead of tax returns. While interest rates are higher and the terms can vary, these loans make it possible to buy a home if you’re self-employed. To get one of these loans, you need to provide your bank statements as proof of income.

Investor Cash Flow Loans

If you’re considering buying a house to rent out, investor cash flow loans can be a good choice. These loans focus on the rental income the property will generate rather than your personal earnings. While the interest rates tend to be higher and are usually fixed for 30 years, the application process is simpler because it mainly looks at the property’s rental income.

Asset-Based Loans

Asset-based loans are great for folks who might not have a steady income but own valuable stuff. Instead of your income, you can use your assets to qualify for these loans. Just a heads up, the interest rates tend to be higher, and the loan terms might vary. To get started, you’ll need to show proof of what you own.

By looking into these home purchase loans, borrowers with unique income sources or special financial situations can find ways to own a home that work better for them.

Key Eligibility Requirements for Home Purchase Loans

If you’re considering buying a home, it’s important to know if you meet the requirements for home purchase loans. The criteria vary depending on the specific loan you are exploring. Here’s a straightforward breakdown:

• Credit Score: This number shows how well you pay back the money you’ve borrowed. Different loans need different scores, usually between 500 and 620. Think of it like grades but for your money habits.
• Down Payment: This is the chunk of money you pay upfront when buying your home. It can be as little as 0% for special loans like VA (Veterans Affairs) and USDA (United States Department of Agriculture) loans, up to a more typical 20% for some regular loans.
• Debt-to-Income Ratio: This is all about balancing your debt with how much you earn. It’s a way to see if you can handle a new loan on top of everything else. For most home purchase loans, this ratio can go up to 50%, meaning half your earnings can go towards debts, including your new mortgage. FHA (Federal Housing Administration) and VA loans allow for more flexibility.
• Employment History: Here, lenders want to see that you have a regular job or a consistent source of income. It’s their way of checking if you can consistently make your loan payments.

Remember, these requirements are here to ensure you can comfortably afford the home you dream of without getting overwhelmed by payments. It’s all about finding the right balance for you and the lender.

Understanding Interest Rates and Loan Terms

When obtaining a home purchase loan, the interest you pay and the repayment terms are influenced by factors like the loan type, your credit score, and current market conditions. Fixed-rate loans keep your monthly payments consistent over the life of the loan, providing stability for budgeting.

In contrast, adjustable-rate loans may offer lower initial rates, which can save you money initially, but those rates can increase later, leading to higher payments.

To illustrate, think of fixed-rate loans like a locked-in subscription to a streaming service: you pay the same amount every month, regardless of any price changes the company might make. On the other hand, an adjustable-rate mortgage is similar to a variable-rate cell phone plan, where your cost starts low but can fluctuate based on market conditions—sometimes saving you money, but with the risk of rising costs when you least expect it.

Steps to Apply for a Home Purchase Loan

To apply for a home purchase loan, you typically go through a few steps:

1. Pre-Approval: The lender looks at your money situation to see how much they’ll let you borrow.
2. Documentation: You need to give them papers showing how much you earn, what you own, and where you’ve worked.
3. Underwriting: The lender checks out your application carefully.
4. Approval and Closing: You agree to the loan and sign all the needed papers.

Loan Limits and Programs

Loan limits vary by loan type and location. Government-backed loans (FHA, VA, USDA) often have specific programs for different borrower needs, such as first-time buyers or low-income households.

Finding the Perfect Lender for Your Home Purchase

When comparing lenders for getting a home purchase loan, it’s good to look at their strengths and what they offer. Gustan Cho Associates (GCA) stands out because they don’t have lender overlays; they provide a wide selection of loan options, including traditional and non-traditional ones like bank statement loans and investor loans, which are specifically useful for various home purchase loans.

They’re known for closing deals fast and are there to help any day of the week, making sure you get through the loan process smoothly.

Other lenders have different strengths and weaknesses. For example, some could have additional requirements or fewer loan options, which could affect your choice if you’re looking for specific home purchase loans. It’s important to compare not just the interest rates and fees but also what kinds of loans they offer and how good their customer service is.

Whether you’re stepping into the world of homeownership for the first time or aiming to expand your investment in real estate, getting to grips with your home purchase loans and partnering with a suitable lender is key. Here at GCA, we’re all about guiding you through each step and helping you discover the most suitable home purchase loan that aligns with your needs. 

FAQs: Home Purchase Loans | Traditional and Non-QM Loans

Q: What is the Importance of Understanding Home Purchase Loans?

A: Acquiring a home is a significant milestone, and understanding your options for home purchase loans is crucial. This knowledge helps you understand the financial aspects of buying a home and choose the loan that best fits your needs and financial situation.

Q: What Types of Home Purchase Loans are Available?

A: Home purchase loans vary to suit different buyer needs, including Conventional, FHA, VA, and USDA loans, each with specific credit score and down payment requirements. There are also non-QM loans that cater to unique financial situations.

Q: What are Non-QM Loans?

A: Non-QM (Non-Qualified Mortgage) loans cater to borrowers with unique financial situations, such as self-employed individuals using bank statements, loans focused on rental income, and asset-based loans not reliant on traditional income verification.

Q: What are the Key Eligibility Requirements for Home Purchase Loans?

A: The key eligibility requirements for home purchase loans depend on the type of loan but generally consist of a credit score, which typically ranges from 500 to 620. The down payment required varies from 0% for VA and USDA loans to up to 20% for some conventional loans. The debt-to-income ratio is usually up to 50% for conventional loans, with higher allowances for FHA and VA loans. Additionally, lenders prefer a consistent employment history or a reliable income source.

Q: How do Interest Rates and Loan Terms Work?

A: Interest rates and loan terms for home purchase loans depend on the loan type, your credit profile, and market conditions. Fixed rates keep your payments consistent, while adjustable rates may start lower but can increase over time.

Q: What is the Application Process for a Home Purchase Loan?

A: The home purchase loan process typically involves pre-approval, documentation submission, underwriting, and approval/closing.

Q: What are the Loan Limits and Special Programs Available?

A: Loan limits vary by loan type and location. Government-backed loans (FHA, VA, USDA) often have specific programs for different borrower needs, such as first-time buyers or low-income households.

Q: How do I Choose the Right Lender for My Home Purchase Loan?

A: When choosing a lender for your home purchase loan, consider factors like loan options, customer service, and closing time. Gustan Cho Associates (GCA) is known for its wide range of loan programs, fast closing process, and exceptional customer service, with availability seven days a week. Be sure to compare different lenders for interest rates, fees, and loan programs before making a decision.

Q: How Can I Get Pre-Approved for a Home Purchase Loan?

A: Undergoing pre-approval entails the lender assessing your financial status to establish the amount you can borrow. This stage is vital as it assists in comprehending your financial plan and demonstrates to sellers that you are a committed buyer.

Q: What Tools Can Help Me Understand My Loan Options?

A: Loan calculators are useful for estimating monthly payments, interest costs, and affordability. They help you plan your budget and understand the financial impact of various loan options.

You can make an informed decision by understanding the different types of home purchase loans, eligibility criteria, and comparing lenders. Whether you’re a first-time homebuyer or looking to invest in real estate, GCA is here to guide you through the process and find the best loan for your needs.

If you have any questions about home purchase loans, please contact us at 800-900-8569, or text us for a faster response. You can also mail us at alex@gustancho.com. The team at Gustan Cho Associates is available 7 days a week, on evenings, weekends, and holidays.

This blog about Home Purchase Loans | Traditional and Non-QM Loans was updated on July 9th, 2025.

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