Which Mortgage Is Right for Your Buyer?
From low-down-payment options to stricter inspections, the loan a buyer chooses can change everything. Here’s what to know before the offer goes in.
NEW YORK — For many families, homeownership remains a cornerstone of the American Dream. Whether you are purchasing your first home or expanding an investment portfolio, understanding your financing options is essential. This week, we explore the most common real estate loan types and what buyers should know before starting the mortgage process.
Conventional loans
Conventional loans are among the most widely used financing instruments. These loans can extend up to 30 years with a fixed interest rate and are typically obtained through federally insured lenders and are primarily designed for owner-occupied residences.
The traditional benchmark for conventional financing is an 80 percent loan-to-value ratio. That means a buyer purchasing a $100,000 home would need a $20,000 down payment. However, many buyers choose 90 or 95 percent loan-to-value options, which can also be structured with a 30-year fixed interest rate.
The 30-year fixed mortgage remains the backbone of the American Dream, offering predictable monthly payments over time.
Non-conventional loans
Real estate investors often pursue non-conventional loans. These are typically arranged through smaller or regional banks. Large national banks often prefer larger loan amounts, making smaller institutions more flexible for certain borrowers.
Non-conventional loans may not be federally backed, which can sometimes make the approval process more streamlined, as lenders do not have to navigate additional federal regulations. Mortgage brokers are also a common source for these types of loans, helping borrowers shop for competitive terms.
FHA and VA loans
Loans administered through the Federal Housing Administration (FHA) and the U.S. Department of Veterans Affairs (VA) are often more favorable to qualified buyers.
VA loans may require no down payment, making them especially attractive to eligible veterans and service members. FHA loans generally require a smaller down payment than conventional loans and offer flexible qualification standards. However, they may come with higher mortgage insurance costs.
However, both FHA and VA loans require strict property inspections before closing. In some cases, sellers may hesitate to accept these offers if additional repairs are mandated as part of the loan approval process.
Costs and the application process
Before loan approval, buyers typically pay for various upfront expenses including:
- Credit report fee
- Appraisal fee
The mortgage application process itself can be lengthy and detailed. There are no shortcuts. Lenders will request documentation verifying income, assets, employment, and credit history. While most companies require similar qualifications, their specific terms and conditions can vary widely.
A mortgage represents a serious financial commitment for both the buyer and the lender. By law, lenders must ensure that borrowers understand the obligations they are undertaking.
The bottom line
Financing a home or investment property is not a one-size-fits-all process. Each loan type offers advantages and trade-offs depending on a buyer's financial position, goals, and eligibility.
As with any major financial decision, working with knowledgeable professionals and carefully reviewing your options can make the difference between a smooth closing and unexpected hurdles.
© Copyright 2026, The Northeast News. All rights reserved.