The least expensive and potentially easiest way to buy a car with bad credit is to pay cash outright for it. That way, no one even needs to check your credit history, and you don’t pay interest expense of any kind.
However, that’s not a path everyone can take, especially with the rising costs of new and used cars. The average MSRP for a new vehicle in 2023 was $34,876, and used vehicles aren’t much cheaper. The average cost of a used vehicle in mid-2023 was more than $27,000.
Even if you have money saved up and can afford to drop it all at once on a car or truck, if you’re looking to build up your credit for the future, a cash purchase won’t help you with that. So, understanding how to buy a car when you have bad credit might be important. Luckily, we’ve got plenty of tips to help you manage this financial step.
What to Consider When Buying a Car With Bad Credit
Buying a new—or new to you—vehicle can be exciting. But before you show up to browse at a dealership and get caught up in negotiations, it’s helpful to do some research and consider your financial situation. Some things to consider include:
What you can afford. When you don’t have great credit, you might feel like you’re lucky to get a loan. This can lead to taking any deal you’re offered, which might be a mistake. Before you start shopping for vehicles or financing, take a realistic look at your income, expenses, and monthly budget. Know what you can afford to pay each month for a car payment, insurance, fuel, and maintenance, and stick to that budget.
Your deal-breakers. You might not be able to get your dream car, but you also don’t want to get stuck with something that doesn’t work for you at all. Decide on a few deal-breakers, and don’t get talked into a vehicle that doesn’t meet those basic needs just because you think you can get a loan for it. For example, a family of six may not be satisfied with a sedan that seats five, no matter how great the deal or loan terms are.
Your credit. Check your credit so you know where you stand. This can help you understand what type of loan you may be able to get and ensure you don’t run into surprises during the financing step.
Tips for Getting a Car Loan With Bad Credit
Once you understand your personal finances, you can move on to applying for a car loan. Here are some tips for buying a car with bad credit if you need a loan to do it.
Correct Any Errors on Your Credit Reports First
When you review your credit situation, order your credit reports from all three major bureaus. Look for any inaccurate information, particularly any error that might be hurting your credit, and dispute it with the credit bureau.
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For example, if you see that your credit card company reported a higher balance than you actually carry or that you’re shown as late on a payment when you’ve always paid on time, these issues could be dropping your score unnecessarily. The Fair Credit Reporting Act requires that credit bureaus review your dispute in a timely manner and delete or edit information that turns out to be incorrect.
Addressing inaccurate negative information on your credit report could help you improve your credit, which might help you get a better deal on a car loan.
Pay Down Revolving Credit Card Balances
Another way you might be able to improve your credit is by paying down credit card and other revolving credit balances. This can improve your overall credit utilization rate, which may in turn help increase your score. It also helps make lenders more comfortable taking a chance on you. If you don’t currently owe high balances to others, they may see you as someone who’s more likely to make a car payment on time every month.
Make a Bigger Down Payment
The issue with trying to get a car loan with bad credit is that lenders consider you a higher-risk borrower than someone with good credit. In short, they’re worried you might leave them holding the balance on the loan, so they want to reduce their risk as much as possible.
Lenders attempt to reduce their risk by not approving people with certain credit scores, charging higher interest, and limiting the size of loan they’re willing to offer. For example, a lender might only approve you for a loan up to $20,000. You can work with that, even if you want a car that’s $27,000, if you can make a big enough down payment. In this hypothetical example, you’d need to pay $7,000 or more down to bring the balance within the range of loan the lender is willing to approve.
Get a Cosigner
Another way you can reduce risk for a lender and potentially increase your chances of getting approved for a car loan is by getting a cosigner. A cosigner is someone who agrees to be responsible for the loan if you don’t make your payments. Typically, this needs to be someone with good credit and the income to make the loan payments.
Always consider this step carefully. You need a cosigner who’s willing to take this step with you, and if your financial situation changes and you truly can’t afford the vehicle in the future, your cosigner may be responsible for the payments. It’s helpful to have a solid plan for making your car loan payments and communicating everything up front with your cosigner.
Get Preapproved for a Car Loan
Going out to buy a car without any financial backing can increase your chances of getting caught up in the moment and signing on the dotted line of a lackluster deal. Instead, consider getting preapproved for a vehicle loan so you know exactly how much buying power you have. A preapproval may also help you negotiate a better deal, because the car dealership or seller doesn’t have any financial power to hold over you.
Improving Your Credit for the Future
Once you get a car loan despite bad credit, ensure you take steps to improve your credit in the future so your next time buying a car is easier. Make your car loan payment on time every month to build up a stronger payment history, and avoid taking out loans and racking up credit card debt unnecessarily. When you’re ready to start looking for a car loan, visit Credit.com to get free, no-obligation quotes from our network lenders.
Many people mistakenly believe they can’t afford to buy a home because they don’t really know what their options are. Fortunately, home loans are not one-size-fits-all. There are various mortgages available to suit your budget and preferences.
So, before you start visiting open houses, take some time to familiarize yourself with the different home loans that are available. Going into the home buying process informed could help you save a lot of money on your down payment, interest, and fees.
The 8 Types of Mortgage Loans Available
Understanding the different types of mortgage loans will help you choose the option that’s best suited for you. Let’s look at a brief overview of the eight types of mortgages available in 2024.
1. Conventional Loans
A conventional loan is a mortgage that’s not issued by the federal government. There are two different types of conventional mortgages you can choose from: conforming and non-conforming loans.
A conforming loan falls within the guidelines laid out by Fannie Mae and Freddie Mac. You’ll take out a conforming loan through a private lender like a bank, credit union, or mortgage company. Since the government doesn’t guarantee the loan, conventional mortgages typically come with more stringent lending requirements.
According to the CFPB, the maximum loan amount for a conventional loan is $484,350. However, it may be as high as $726,525 in counties with a high cost of living. You’ll have to take out private mortgage insurance (PMI) if you don’t have a 20% down payment.
Conventional loans are fixed-rate mortgages, which means your monthly mortgage payment remains the same throughout the entire life of the mortgage loan. The terms typically range from 10 to 30 years:
30-year fixed-rate mortgage
20-year fixed-rate mortgage
15-year fixed-rate mortgage
10-year fixed rate mortgage
Pros:
It can be used to purchase a primary home or an investment property
Tends to cost less than other types of loans
You can cancel your private mortgage insurance (PMI) once you reach 20% equity in your home
Cons:
Must have a minimum FICO score of 620 or higher
Harder to qualify for than government-backed loans
You’ll need to have a low debt-to-income ratio to qualify
2. Conventional 97 Mortgage
A conventional 97 mortgage is similar to a conventional loan in that it’s widely available to various borrowers. The main difference is that with this type of home loan, you only have to pay a 3% down payment.
The program is available for first-time and repeat home buyers. However, it must be your primary place of residence, and the maximum loan amount is $510,400.
Pros:
Widely available to most borrowers
Only requires a 3% down payment
Available for first-time and repeat homebuyers
Cons:
Cannot be used to purchase investment properties
The maximum loan amount is $510,400
Requires a minimum FICO score of 660 or higher
3. FHA Loans
FHA loans are backed by the Federal Housing Administration and are a popular option for first-time home buyers. To qualify, you need to have a 3.5% down payment and a minimum credit score of 580.
If you have a credit score of 500 or higher, you can qualify for an FHA loan with a 10% down payment. These flexible requirements make FHA loans a suitable option for borrowers with bad credit.
To qualify for an FHA home loan, you must have a debt-to-income ratio of 43% or less. These loans can’t be used to purchase investment properties, and your home must meet the FHA’s lending limits.
These limits vary by state, so you’ll need to check the FHA’s website to see what the guidelines are for your area.
Pros:
Loans come with low down payment options
A viable option for borrowers with bad credit
Available for first-time and repeat homeowners
Cons:
Loans can’t be taken out for investment properties
If your credit score is below 580, a 10% down payment is required
You must have a debt-to-income ratio below 43%
Mandatory mortgage insurance premiums
4. FHA 203(k) Rehab Loans
An FHA 203(k) rehab loan is sometimes referred to as a renovation loan. It allows home buyers to finance the purchase of their home and any necessary renovations with a single loan.
Many people purchase older homes to fix them up. Instead of taking out a mortgage and then applying for a home renovation loan, you can accomplish both within a single mortgage.
A rehab loan is similar to an FHA loan in that you’ll need a 3.5% down payment. However, the credit requirements are stricter, and you’ll need a minimum credit score of 640 to qualify.
Pros:
Allows you to buy a home and finance the remodel within one mortgage
Requires a minimum 3.5% down payment
Easier to qualify since the FHA backs your loan
Cons:
Credit requirements are more stringent than typical FHA loans
You must hire approved contractors and cannot DIY the renovations
The closing process takes longer than other types of mortgages
5. VA Loans
The Department of Veteran Affairs guarantees VA loans. These loans are designed to make it easier for veterans and service members to qualify for affordable mortgages.
One of the biggest advantages of taking out a VA loan is that it doesn’t require a down payment or mortgage insurance premium (MIP). And there are no listed credit requirements, though the lender can set their own minimum credit requirements. VA loans typically come with a lower interest rate than FHA and conventional loans.
To qualify for a VA loan, you must either be active duty military, a veteran or honorably discharged. You’ll need to apply for your mortgage through an approved VA lender.
Pros:
No down payment required
No PMI required
Flexible credit requirements
Cons:
Must be a veteran to qualify
Some sellers will not want to deal with a VA loan
6. USDA Loans
A USDA loan is a type of mortgage that’s available for rural and suburban home buyers. It’s a viable option for borrowers with lower credit scores that are having a hard time qualifying for a traditional mortgage.
USDA loans are backed by the U.S. Department of Agriculture, and they help low-income borrowers find housing in rural areas. USDA loans do not require a down payment, but you will need a minimum credit score of 640 to qualify.
You will need to meet the USDA’s eligibility requirements to qualify for the loan. But according to the department’s property eligibility map, over 95% of the U.S. is eligible.
Pros:
No down payment required
A practical option for low-income borrowers
Available to first-time and repeat home buyers
Cons:
A minimum credit score of 640 is required
Housing is limited to rural and suburban areas
7. Jumbo Loans
A jumbo loan is a mortgage that exceeds the financing guidelines laid out by the Federal Housing Finance Agency. These loans are unable to be purchased or guaranteed by Fannie Mae or Freddie Mac.
A jumbo mortgage is financing for luxury homes in competitive real estate markets, and the limits vary by state. In 2024, the FHFA raised the limits for a one-unit property to $766,550, increasing from $726,200 in 2023. In certain high-cost areas, the limits for jumbo loans vary, reaching up to $1,149,825. These jumbo loans are for mortgages that exceed the set limits in their respective counties.
If you’re hoping to buy a home that costs more than $1 million, you’ll need to take out a super jumbo loan. These loans provide up to $3 million to purchase your home. Both jumbo and super jumbo mortgages can be difficult to qualify for and require excellent credit.
Pros:
These loans make it possible to purchase large homes in expensive areas
Typically comes with flexible loan terms
Cons:
Jumbo loans and super jumbo loans come with higher interest rates
You’ll need a good credit history to qualify
8. Adjustable Rate Mortgages (ARMs)
Unlike a fixed-rate mortgage, where the interest rate is set for the life of the loan, an adjustable-rate mortgage (ARM) comes with interest rates that fluctuate. Your interest rate depends on the current market conditions.
When you first take out an ARM, you will typically start with a fixed rate for a set period of time. Once that introductory period is up, your interest rate will adjust on a monthly or annual basis.
An ARM can be a suitable option for some borrowers because your interest rate will likely be low for the first couple of years you own the home. But you need to be comfortable with a certain level of risk.
And if you choose to go this route, you should look for an ARM that caps the amount of interest you pay. That way, you won’t find yourself unable to afford your monthly payments when the interest rates reset.
4 Types of ARMs
There are 4 different types of adjustable-rate mortgages typically offered:
One Year ARM – The one-year adjustable-rate mortgage interest rate changes every year on the anniversary of the loan.
10/1 ARM – The 10/1 ARM has an initial fixed interest rate for the first ten years of the mortgage. After 10 years is up, the rate then adjusts each year for the remainder of the mortgage.
5/5 and 5/1 ARMs – ARMs that have an initial fixed rate for the first five years of the mortgage. After 5 years is up, for the 5/5 ARM, the interest rate changes every 5 years. For the 5/1 ARM, the interest changes every year.
3/3 and 3/1 ARMs – Similar to the 5/5 and 5/1 ARMs, except the initial fixed-rate changes after 3 years. For the 3/3 ARM, the interest rate changes every 3 years and for the 3/1 ARM, it changes every year.
Pros:
Interest rates will likely be low in the beginning.
If you pay the loan off quickly, you could pay a lot less money in interest.
Cons:
Your monthly mortgage payments will fluctuate.
Many borrowers have gotten into financial trouble after taking out an ARM.
Choosing the Right Home Loan
When it comes to choosing a home loan, you need to consider a few key factors. First, you’ll want to think about the type of loan that is best suited to your needs.
Fixed-rate mortgages offer stability and predictability, while adjustable-rate mortgages (ARMs) can be a viable option for those who expect their income to increase significantly over time. You’ll also want to consider your budget and how much you can afford to borrow, as well as the size of your down payment and the length of the loan term.
It’s also crucial to shop around and compare offers from multiple mortgage lenders. While it’s tempting to go with the first lender you find, it pays to do your homework and see what other options are available.
This can help you get a better rate and more favorable terms on your loan. It’s a good idea to get quotes from at least three different lenders, and to consider both traditional banks and online lenders.
Tips for Getting the Best Rates and Terms
One of the most effective strategies is to improve your credit score. Lenders look closely at credit scores when deciding whether to approve a loan. Those with higher scores are typically offered better terms. You can improve your credit score by paying your bills on time, reducing your debt, and correcting any errors on your credit report.
Another tip is to make a larger down payment, which can help you secure a lower interest rate and reduce the size of your monthly payments. Finally, consider working with a mortgage broker, who can help you shop around and find the best deal.
Bottom Line
As you can see, there are many home loans for you to choose from. The type of mortgage that’s best for you will depend on your current income and financial situation.
If you’re not sure where to start, consider working with a qualified loan officer. They can assess your situation and recommend the option that will be best for you.
While the holidays tend to be a reflective time, the definitive flip of the calendar into a new year can inspire you to set your sights high.
Go to the gym more. Be on your phone less. And — if you’re like many Americans — get your credit card debt under control, once and for all.
Summer 2023 marked a new high for Americans’ total credit card debt, with balances passing $1 trillion for the first time in history, according to the Federal Reserve Bank of New York.
This type of debt can feel uniquely stressful, like something you can’t get ahead of no matter how hard you try. Though there’s no quick fix for credit card debt, consolidation can be a smart financial strategy that simplifies your debts and lowers the amount of interest you pay.
Here are five signs that consolidation may be the right financial move to make in 2024.
1. You have a pretty good credit score
Your credit score is one of the most important factors when consolidating credit card debt, because strong credit will help you qualify for a debt consolidation product.
Tiffany Johnson, a certified financial planner based in Athens, Georgia, says the first step she takes with her clients is to have them pull their credit reports from the three major credit bureaus (Experian, Equifax and TransUnion) and check for any errors. You can get your credit report weekly for free at AnnualCreditReport.com.
“If they have a reasonable credit score, I would say at least 600, that’s when we’ll start looking at debt consolidation options for them,” she says.
Though some consolidation products are available to borrowers with credit scores below 600, interest rates tend to be similar to or even higher than their current debts, so it probably won’t make sense to consolidate, Johnson says. A similar rate means you’ll miss out on interest savings, and you may not be able to get out of debt faster.
2. You’re juggling multiple credit card balances
If you’re struggling to wrangle many balances, consolidating can help because it combines multiple debts into one, usually via a balance transfer card or a debt consolidation loan.
With a balance transfer, you roll all of your credit card debts onto the balance transfer card, so you’re left with only one balance. If you go with a debt consolidation loan, you use the loan funds to pay off your credit cards, leaving you with just the monthly payment on the loan.
This can make a pile of unruly debts seem more manageable, since you only have one payment instead of multiple.
Johnson says she looks for whether her clients have more than three credit cards with different payment dates, minimum payment amounts and interest rates before recommending consolidation.
3. You’re making minimum monthly payments, but seeing no progress
If you feel like you can’t get out from under your credit card debt, that’s because you’re not just dealing with the debt itself, but also the interest that accumulates when you carry a balance.
In 2022, consumers were charged $130 billion in interest and fees — the highest amount ever measured by the Consumer Financial Protection Bureau, which released the report in October 2023. Interest accounted for $105 billion of that sum.
Consolidation can help break the high-interest trap, especially if you go with a balance transfer card, since these cards have zero-interest promotional periods that can last up to 21 months. You’ll pay no interest during this time even if you carry a balance.
Debt consolidation loans do charge interest, but if you qualify for a lower interest rate than the average rate across your credit cards, you’ll still save money.
If your debt is half or more of your gross income, or it’ll take you longer than five years to pay it off, you may want to explore debt relief options instead of consolidation. For example, working with a reputable credit counseling agency to enter a debt management plan can help you pay down your debts at a reduced interest rate.
4. You’re motivated by a clear finish line
The psychology behind paying off debt is just as important as the logistics, says Allison Sanka, an accredited financial counselor based in Berwyn, Pennsylvania.
If you prefer knowing an exact date you’ll be out of debt, consolidation can give you a clear endpoint, particularly if you go with a debt consolidation loan. These loans have fixed interest rates and repayment terms, so as long as you make the payments on time, you’ll know the exact date you’ll be debt-free.
But a loan isn’t the only option. Sanka says most of her clients have success without consolidating by using the snowball or avalanche methods, in which you tackle debts one-by-one, starting with either the smallest debt (snowball) or the one with the highest interest rate (avalanche).
“I have my clients pay off the lowest balance first if they can knock it out really fast,” Sanka says. “It’s pretty psychologically rewarding to see the debt being tackled in its original form.”
5. You’ve gotten to the root of your debt
Both Sanka and Johnson emphasize addressing the origin of your debt before consolidating. If you skip this step, consolidation won’t matter since you’ll likely find yourself in debt again, they say.
Sanka recommends working backward to figure out what led to your debt in the first place. For example, if you struggle to manage unexpected expenses, it’s important to build up an emergency fund. Even $500 can mean the difference between being able to cover a surprise bill or having to reenter the debt cycle, she says.
Johnson advises clients to not use their credit cards for discretionary expenses like eating out since those costs vary month-to-month and are hard to budget for. Instead, tie fixed expenses to your credit card so that you’re charged the same amount each month. You’re then less likely to be caught off guard by your credit card statement, she says.
“You just need something to keep you off the hamster wheel of using the credit card for everything that comes your way,” Sanka says.
FHA loans have been making homeownership more accessible for decades. Tailored to borrowers with lower credit, the FHA makes it possible to buy a house with a credit score of just 580 and only 3.5% down.
But home buyers aren’t the only ones who can benefit. For current homeowners, an FHA refinance may let you access low rates and home equity, even without great credit.
Not sure whether you’ll qualify for a mortgage? Check out the FHA program. You might be surprised.
Verify your FHA loan eligibility. Start here
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>Related: How to buy a house with $0 down: First-time home buyer
What is an FHA loan?
An FHA loan is a mortgage insured by the Federal Housing Administration (FHA).
FHA insurance protects mortgage lenders, allowing them to offer loans with low interest rates, easier credit requirements, and low down payments (starting at just 3.5%).
Thanks to their flexibility and low rates, FHA loans are especially popular with first-time home buyers, home shoppers with low or moderate incomes, and/or lower-credit home buyers.
But FHA financing isn’t limited to a certain type of buyer — anyone can apply.
Verify your FHA loan eligibility. Start here
How does an FHA loan work?
The first thing to know about FHA mortgages is that the Federal Housing Administration doesn’t actually lend you the money. You get an FHA mortgage loan from an FHA-approved bank or lender, just like you would any other type of home mortgage loan.
The FHA’s role is to insure these mortgages, offering lenders protection in case borrowers can’t pay their loans back. In turn, this lets mortgage lenders offer FHA loans with lower interest rates and looser standards for qualifying.
The one catch — if you want to call it that — is that you pay for the FHA insurance that protects your mortgage lender. This is called “mortgage insurance premium” or MIP for the life of the loan or until the FHA home loan is refinanced into another type of mortgage. We go over this in detail below.
Types of FHA loans
FHA loans offer various options to meet different home buying needs. These government-backed loans are designed to make homeownership more accessible, especially for those with less-than-perfect credit scores or limited savings.
Each type of FHA loan is tailored to different financial situations and home buying needs. Here’s what you can expect.
Compare FHA loan quotes from multiple lenders. Start here
FHA mortgage loan
An FHA mortgage is ideal for first-time home buyers, requiring a minimum credit score of 580 for a 3.5% down payment. Those with credit scores between 500 and 579 can still qualify for a 10% down payment. These loans are popular due to their lenient credit score requirements and low-down payment options.
FHA rate-and-term refinance
An FHA refinance loan is suited for borrowers looking to improve their loan terms or lower interest rates, especially if their credit scores have improved since obtaining their original mortgage. It offers a way to adjust loan terms to better fit current financial situations.
FHA Streamline Refinance
For current FHA loan holders, the FHA Streamline Refinance provides an efficient way to refinance with minimal documentation and underwriting. It often results in lower interest rates and can potentially reduce mortgage insurance premiums. This option is advantageous for those who want to refinance without a complicated process.
FHA cash-out refinance
An FHA cash-out refinance allows homeowners to tap into their home equity, converting it into cash. It requires a minimum credit score of 620, and borrowers must leave at least 15% equity in their home after the refinance. It’s suitable for those needing extra funds for expenses or investments.
FHA Home Equity Conversion Mortgage (HECM)
HECM is a reverse mortgage for homeowners aged 62 and older, allowing the conversion of home equity into cash. It provides financial flexibility for seniors by enabling access to their home equity without selling the home.
FHA 203(k) loan
The FHA 203(k) loan is designed for home purchases requiring renovations. It combines the cost of the home and renovation expenses into one loan. Borrowers must meet specific credit score requirements and ensure that renovations are completed within six months.
FHA Energy Efficient Mortgage
This loan type allows borrowers to include energy-efficient upgrades in their FHA loan. It’s aimed at reducing utility costs and increasing the home’s environmental friendliness, thereby potentially increasing its value.
Section 245(a) loan
The Section 245(a) program is for borrowers expecting an increase in their income. It offers a graduated payment schedule that starts low and increases over time, aligning with anticipated income growth. This loan is particularly beneficial for young professionals expecting career advancement.
Check your FHA loan eligibility. Start here
FHA loan requirements
Homeownership can be a liberating experience, especially for first-time buyers. With their flexible guidelines and government backing, FHA home loans provide a welcoming path.
Understanding FHA loan requirements can make the process much easier, opening the door to a future in your ideal home.
Check your FHA loan eligibility. Start here
To be eligible for an FHA loan, applicants must adhere to specific guidelines:
The property must undergo a home appraisal by an FHA-approved appraiser.
The property must serve as the applicant’s primary residence; investment properties and second homes are not eligible.
Occupancy of the property is required within two months following the closing.
A mandatory inspection is conducted to ensure the property meets FHA’s basic standards.
There are a few more specific conditions to qualify, such as a down payment amount, mortgage insurance, credit score, loan limits, and income requirements.
FHA loan down payment requirements
FHA loans require a minimum down payment, which varies based on credit score. For credit scores of 580 and above, a minimum down payment of 3.5% is required. Borrowers with credit scores between 500 and 579 must make a 10% down payment.
FHA mortgage insurance premiums
FHA mortgage insurance premium (MIP) is what makes the FHA program possible. Without the MIP, FHA-approved lenders would have little reason to make FHA-insured loans.
There are two kinds of MIP required for an FHA loan. One is paid as a lump sum when you close the loan, and the other is an annual premium, which becomes less expensive each year as you pay off the loan balance:
Upfront Mortgage Insurance Premium (UFMIP) = 1.75% of the loan amount for current FHA loans and refinances
Annual Mortgage Insurance Premium (MIP) = 0.85% of the loan amount for most FHA loans and refinances
MIP is split into monthly payments that are included in your mortgage payment. You’ll have to pay FHA insurance for the life of the loan or if you refinance into another type of mortgage loan.
The good news is that, as a homeowner or home buyer, your FHA loan’s MIP rates have dropped. Today’s FHA MIP costs are now as much as 50 basis points (0.50%) lower per year than they were in previous years.
Also, you have ways to reduce what you’ll owe in FHA MIP.
Depending on your down payment and loan term, you can reduce the length of your mortgage insurance to 11 years instead of the entire loan.
Loan term
Original down payment
MIP duration
20, 25, 30 years
Less than 10%
Life of loan
20, 25, 30 years
More than 10%
11 years
15 years or less
Less than 10%
Life of loan
15 years or less
More than 10%
11 years
Or, you could refinance out of FHA MIP at a later date.
With FHA interest rates as competitive as they are today, refinancing could reduce your monthly mortgage payments and cancel your mortgage insurance premium if you have enough equity in the home.
Check your FHA loan rates. Start here
FHA loan credit score minimums
The minimum credit score requirement for an FHA loan is 500. However, a score of 580 or higher allows for a lower down payment. Credit scores directly impact loan terms and down payment amounts.
Debt-to-income ratio
FHA loans consider the borrower’s debt-to-income (DTI) ratio, a measure of monthly debt payments against monthly income. The FHA prefers a DTI ratio of no more than 43%, though exceptions can be made for higher ratios with compensating factors.
Income and employment requirements
There is no specific income threshold for FHA loans, but borrowers must demonstrate steady employment history. Verification includes pay stubs, W-2s, tax returns, and bank statements.
FHA loan limits
Loan limits for FHA loans vary by county. However, starting January 1, 2024, the new FHA loan limit will be $498,257 for a single-family home in most parts of the country. Limits increase for 2-, 3-, and 4-unit properties.
FHA loan rates
Interest rates for FHA loans are competitive and can vary based on factors such as prevailing market rates, borrower’s credit score, income, loan amount, down payment, and DTI ratio. Government backing often enables lenders to offer lower rates compared to conventional mortgages.
Compare your FHA loan rates from multiple lenders. Start here
Today’s rates for a 30-year, fixed-rate FHA loan start at % (% APR), according to The Mortgage Reports’ daily rate survey.
Thanks to their government backing, FHA loan rates are competitive even for lower-credit borrowers. But interest rates can vary a lot from one lender to the next, so be sure to shop around for your best offer.
FHA loan benefits
Check your FHA loan eligibility. Start here
1. Lower down payment: Just 3.5 %
For today’s home buyers, there are only a few mortgage options that allow for down payments of 5% or less. The FHA loan is one of them.
With an FHA mortgage, you can make a down payment as small as 3.5% of the home’s purchase price. This helps home buyers who don’t have a lot of money saved up for a down payment along with home buyers who would rather save money for moving costs, emergency funds, or other needs.
2. FHA allows 100% gift funds for the down payment and closing costs
The FHA is generous with respect to using gifts for a down payment. Very few loan programs will allow your entire down payment for a home to come from a gift. The FHA will.
Via the FHA, your entire 3.5% down payment can be a gift from parents or another family member, an employer, an approved charitable group, or a government homebuyer program.
If you’re using a down payment gift, though, you’ll need to follow the process for gifting and receiving funds.
3. FHA loans allow higher debt-to-income ratios
FHA loans also allow higher debt-to-income ratios.
Your debt-to-income ratio, or DTI, is calculated by comparing two things: your debt payments and your before-tax income.
For instance, if you earn $5,000 a month and your debt payment total is $2,000, your DTI is 40%.
Officially, FHA maximum DTIs are as follows.
31% of gross income for housing costs
43% of gross income for housing costs plus other monthly obligations like credit cards, student loans, auto loans, etc.
However, a 43% DTI is actually on the low end for most FHA borrowers. And FHA will allow DTI ratios as high as 50%. Although to get approved at such a high ratio, you’ll likely need one or more compensating factors — for instance, a great credit score, significant cash savings, or a down payment exceeding the minimum.
In any case, FHA is more lenient in this area than other mortgage loan options.
Most conventional mortgage programs — those offered by Fannie Mae and Freddie Mac — only allow debt-to-income ratios between 36% and 43%.
With down payments of less than 25%, for example, Fannie Mae lets you go to 43% DTI for FICOs of 700 or higher. But most people don’t get conventional loans with debt ratios that high.
4. FHA loans accept lower credit scores
Officially, the minimum credit scores required for FHA mortgage loans are:
580 or higher with a 3.5% down payment
500-579 with a 10% down payment
High credit scores are great if you have them. But past credit history mistakes take a while to repair.
FHA loans can help you get into a home without waiting a year or more for your good credit to reach the “excellent” level. Other loan programs are not so forgiving when it comes to your credit rating.
Fannie Mae and Freddie Mac (the agencies that set rules for conventional loans) say they accept FICOs as low as 620. But in reality, some lenders impose higher minimum credit scores.
5. FHA even permits applicants with no credit scores
What if an applicant has never had a credit account? Their credit report is, essentially, blank.
FHA borrowers with no credit scores may also qualify for a mortgage. In fact, the U.S. Department of Housing and Urban Development (HUD) prohibits FHA lenders from denying an application based solely on a borrower’s lack of credit history.
The FHA allows borrowers to build non-traditional credit as an alternative to a standard credit history. This can be a huge advantage to someone who’s never had credit scores due to a lack of borrowing or credit card usage in the past.
Borrowers can use payment histories on items such as utility bills, cell phone bills, car insurance bills, and apartment rent to build non-traditional credit.
“Not all lenders who are FHA approved offer these types of loans, so check with your loan officer individually,” cautions Meyer.
6. FHA loans can be up to $ in most of the U.S.
Most mortgage programs limit their loan sizes, and many of these limits are tied to local housing prices.
FHA mortgage limits are set by county or MSA (Metropolitan Statistical Area), and range from $ to $ for single-family homes in most parts of the country.
Limits are higher in Alaska, Hawaii, the U.S. Virgin Islands, and Guam, and also for duplexes, triplexes, and four-plexes.
7. FHA also allows extended loan sizes
As another FHA benefit, FHA loan limits can be extended where home prices are more expensive. This lets buyers finance their home using FHA even though home prices have skyrocketed in certain high-cost areas.
In Orange County, California, for example, or New York City, the FHA will insure up to $ for a mortgage on a single-family home.
For 2-unit, 3-unit and 4-unit homes, FHA loan limits are even higher — ranging up to $.
If your area’s FHA’s loan limits are too low for the property you’re buying, you’ll likely need a conventional or jumbo loan.
8. If you have an FHA loan, you can lower your rate with an FHA Streamline Refinance
Another advantage for FHA-backed homeowners is access to the FHA Streamline Refinance.
The FHA Streamline Refinance is an exclusive FHA program that offers homeowners one of the simplest, quickest, and most affordable paths to refinancing.
An FHA Streamline Refinance requires no credit score checks, no income verifications, and home appraisals are waived completely.
In addition, via the FHA Streamline Refinance, homeowners with a mortgage pre-dating June 2009 get access to reduced FHA mortgage insurance rates.
Verify your FHA loan eligibility. Start here
FHA loan disadvantages
What is the downside to an FHA loan? Among the numerous benefits of FHA loans, there are certain disadvantages that potential borrowers should be aware of. These drawbacks can impact the overall cost and flexibility of the loan.
Here are the downsides that you should know about FHA home loans.
FHA loan mortgage insurance premiums
One of the primary drawbacks of FHA loans is the mandatory mortgage insurance premiums. These include an upfront premium at closing, generally 1.75% of the loan amount, and ongoing monthly payments. This additional cost can make FHA loans more expensive over the long term
Loan limits
One notable limitation of FHA loans is the lower loan limits compared to conventional loans, which can be restrictive for higher-income buyers. The FHA mortgage limit for a one-unit property ranges from $ to $ for single-family homes in most parts of the country, which may not be sufficient in areas with higher property values.
Strict property requirements
FHA loans come with stringent property requirements. The purchased home must be the borrower’s primary residence and must meet specific safety and condition standards. This requirement can limit the types of properties that qualify for an FHA loan.
FHA loan alternatives
Alternative loans, like USDA and VA loans, offer distinct advantages, such as no down payment requirements, but come with specific eligibility criteria. Understanding these alternatives ensures you make a well-informed decision about the type of mortgage that’s right for you.
Conventional 97
The Conventional 97 program comes with a down payment requirement of just 3%. It stands out due to the absence of income limits and mandatory home buyer education, making it accessible to a broader range of homebuyers.
Check your conventional loan eligibility. Start here
HomeReady Mortgage by Fannie Mae
The HomeReady mortgage program is designed for low- to moderate-income families, allowing a home purchase with only a 3% down payment. Furthermore, this program permits the entire downpayment and closing costs to be covered by gifts or grants, offering significant financial flexibility.
Freddie Mac Home Possible
The Home Possible loan is notable for its reduced mortgage insurance costs compared to other similar programs. With a 3% down payment requirement and lower ongoing costs, Home Possible is an attractive alternative for those looking to save on mortgage insurance.
USDA loans
USDA loans, backed by the U.S. Department of Agriculture, are an attractive alternative, especially for moderate-income buyers in rural areas. They don’t require a down payment, which is a significant advantage. However, eligibility for USDA loans is restricted based on income and geographical limits, and not every property qualifies for this type of financing.
VA loans
VA loans are another viable alternative, particularly for U.S. military service members, veterans, and certain surviving spouses. Like USDA loans, VA loans also require no down payment. However, eligibility for VA loans is exclusive to the military community, limiting their accessibility to the general public.
FAQ: FHA loans
Can I choose between a fixed rate and an adjustable-rate FHA loan?
Yes, FHA loans offer both fixed-rate and adjustable-rate (ARM) options. A fixed-rate FHA loan provides a consistent interest rate and monthly payment for the life of the loan, ideal for those who prefer stability. An adjustable-rate FHA loan, on the other hand, has an interest rate that can change over time, typically offering lower initial rates.
Do FHA loans have lower interest rates?
FHA loans often have lower interest rates compared to many conventional loan options. This is largely due to the government backing of FHA loans, which reduces the risk for lenders. As a result, lenders are generally able to offer more competitive mortgage rates to borrowers. However, the actual interest rate you’ll receive on an FHA loan can vary based on several factors, including your credit score, loan amount, and the current market conditions. It’s always a good idea to compare rates from multiple lenders to ensure you’re getting the best deal possible for your situation.
Are FHA loans assumable?
Yes. A little-known FHA benefit is that the agency will allow a home buyer to assume the existing FHA mortgage on a home being purchased. The buyer must still qualify for the mortgage with its existing terms but, in a rising mortgage rate environment, it can be attractive to assume a home seller’s loan. Five years from now, for example, a buyer of an FHA-insured home could inherit a seller’s sub-3 percent mortgage rate. This can make it easier to sell the home in the future.
Can you buy a rental property with an FHA loan?
While you can’t buy a true rental property with an FHA loan, you can buy a multi-unit property — a duplex, triplex, or fourplex — live in one of the units, and rent out the others. The rent from the other units can partially, or even fully, offset your mortgage payment.
Are closing costs higher for FHA loans?
Closing costs are about the same for FHA and conventional loans with a couple of exceptions. First, the appraiser’s fee for an FHA loan tends to be about $50 higher. Also, if you choose to pay your upfront MIP in cash (instead of including this 1.75% fee in your loan amount), this one-time fee will be added to your closing costs. Additionally, the fee can be rolled into your loan amount.
What credit score do I need for an FHA loan?
Most borrowers will need a minimum credit score of 580 to get an FHA loan. However, home buyers who can put at least 10% down are eligible to qualify with a 500 score. Yet, each lender may have their own credit score minimums, separate to those established by the Federal Housing Administration.
What is the loan-to-value ratio requirement for FHA loans?
The loan-to-value (LTV) ratio for FHA loans typically cannot exceed 96.5%, meaning you can borrow up to 96.5% of your home’s value. This high LTV ratio is part of what makes FHA loans accessible, especially for first-time homebuyers who might not have substantial savings for a down payment.
How does PMI work with FHA loans?
For FHA loans, the equivalent of private mortgage insurance (PMI) is the mortgage insurance premium (MIP). MIP is required for all FHA loans, regardless of the down payment or loan-to-value ratio. This insurance protects lenders from losses in case of borrower defaults and is included in both upfront and ongoing mortgage costs.
What happens if I default on an FHA loan?
If you default on an FHA loan, the lender can initiate foreclosure proceedings. The FHA loan program, backed by the Federal Housing Administration, is designed to minimize the risk of defaults by offering more lenient qualification criteria. However, consistent failure to make mortgage payments may lead to foreclosure, impacting your credit score and homeownership status.
Today’s FHA loan rates
Now is an opportune time to consider an FHA loan, with current mortgage rates being historically competitive.
FHA loan interest rates are typically among the most competitive. To capitalize on these favorable rates, start by comparing offers from FHA-approved lenders.
Finding the most affordable loan could be just a few clicks away. Begin your journey towards homeownership today by exploring your options and discovering the best rates available for your financial situation.
Time to make a move? Let us find the right mortgage for you
The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.
If you overpay your credit card, you won’t lose the money, and your credit won’t take a hit. You’ll just have a negative credit card balance, which you can use toward future purchases, or you can request a credit balance refund.
With so many things to keep track of in your financial life, it can be easy to make an occasional mistake. And while mistakes like a late payment can have negative effects on your credit health, there are other slip-ups that aren’t necessarily a bad thing—and overpaying your credit card is one of them.
If you overpay your credit card, perhaps due to an automatic payment and a manual payment overlapping, there’s no need to worry. You won’t lose the money, and your credit score won’t take a hit. You’ll know you’ve overpaid if you have a negative credit card balance.
What is a negative credit card balance?
A negative card balance means that something has happened to cause your balance to dip below zero. Your first thought may be that something is wrong—but a negative balance means that your credit issuer owes you money.
Common ways negative balances happen
Negative credit card balances are fairly common and are nothing to fret over. If you notice a negative balance, you may wonder what triggered it. Below are five common causes.
Your manual payments and autopay overlapped. If you manually paid an amount greater than your balance, you would have a negative balance. Alternatively, if you made a payment around the same time that an automatic payment happened, your balance could dip below zero.
You received a refund on a purchase. If you made a purchase with your credit card and then paid off your full balance, you would show a balance of $0. If you then returned the purchase and received a refund on the card, you would have a negative balance.
You earned rewards or statement credits. Some credit card companies offer welcome bonuses or cashback rewards in the form of statement credits. If you received credit when your balance was already zero, you would have a negative balance.
You reversed fraudulent charges. If you were the victim of credit card fraud or someone used your card without authorization, your card issuer would reverse the transaction. This could result in a negative balance, depending on how much was charged and your previous balance. If the fraud is reflected on your credit report, you can address it by filing a dispute.
You negotiated fees. If you can successfully negotiate with your credit card issuer to waive fees, you may end up with a negative balance if you’ve already paid off those charges.
What to do if you overpay your credit card
No matter the cause of your negative balance, you have two options:
Do nothing. Any future purchases you make will bring your account back to positive. If you don’t make any purchases on the card after six months, creditors must refund the full negative balance.
Request a credit balance refund from your credit card issuer. Since a negative balance means the credit issuer owes you money, many people opt to file for a refund to bring their account back to zero.
How to submit a credit refund request
Each credit card issuer has its own policy on how credit balance refunds work, so check with your financial institution for step-by-step instructions.
Typically, you can request a credit refund online, via mail or over the phone. A refund may be issued as cash, check, direct deposit or money order.
The Federal Trade Commission requires creditors to send you a credit refund within seven business days of receiving a written request. If you haven’t heard from them after seven days, follow up to ensure it was issued and processed correctly.
Fraud triggers
While credit balance refunds are usually executed without difficulty, there may be instances where your financial institution is suspicious of fraud. This typically happens if the negative balance is significant—like if you added an extra zero to your payment amount.
Large negative balances are a warning signal of refund fraud or money laundering. To combat this, creditors may freeze your account or even shut it down as a measure of consumer protection. If fraud is suspected due to a mistake, it may cause some inconvenience.
As soon as you become aware of a large negative balance, call your credit card company and explain the mistake. They’ll make your account right again.
How overpaid balances show up on your credit report
A negative credit card balance isn’t bad for your credit. In fact, it doesn’t show up on your credit report at all, so the three major credit bureaus will never know you have a negative balance—it will simply show up as zero.
Perhaps more important than the balance itself is the credit utilization rate. According to FICO®, this plays into the “amounts owed” category of your credit score, which accounts for 30 percent of the total score. When you have a negative balance, your utilization rate is zero percent, which works in your favor—typically, the lower your utilization rate is, the better.
4 tips to prevent overpaying your credit card balance
While there’s virtually no harm in overpaying your credit card balance, it may be a hassle to request a balance refund in the event of overpayment. Also, dealing with potential fraud triggers could prove frustrating. Here are four tips to help you avoid overpaying your credit card balance.
1. Check your statements regularly
Checking your credit card statement and knowing your balance is a great way to ensure you won’t overpay your credit card balance. Carefully review your statement before making a payment and note if there are any discrepancies.
Returns and refunds can also result in overpayment if they come through after you pay off the balance, so make sure you check that for any recent refunds.
2. Set up automatic payments
Automatic payments are extremely helpful—especially for avoiding late fees. Often, you can set up an automatic payment for a specific amount or to pay off the current balance. Just ensure you have enough in your checking account to cover the payment to avoid overdraft.
3. Avoid manual payments right before a scheduled payment
Manual payments that are soon followed by automatic payments can result in an overpayment. If possible, consider waiting until the automatic payment goes through and then pay the remaining balance.
4. Use account alerts
Banking and credit card companies often allow you to set up automatic alerts based on specific criteria. These alerts can come as a text, email or phone notification. You may consider setting up an alert when your card balance reaches a specific threshold.
Negative credit balance FAQ
There tends to be a bit of confusion related to negative credit card balances that may cause people to purposefully overpay in hopes of receiving a benefit. Let’s answer the following commonly asked questions to clear up any misconceptions.
Will overpaying my credit card increase my credit score?
Overpaying has no more impact on your credit score than paying the full balance does. Paying down your credit card to a zero balance is good for your credit, but you won’t see an extra boost by purposefully overpaying because it will still show up as a zero balance on your credit report.
If you’re looking to improve your credit score, try these tips:
Make all loan and credit card payments on time
Lower your credit utilization
Avoid closing old credit cards (even if you don’t use them)
Open a secured credit card
Become an authorized user on the credit card of someone with good credit
Apply for a credit building loan
Consider sending a pay for delete letter
Dispute inaccuracies on your credit report
Include rent and utilities on your credit report
Will overpaying my credit card increase my credit limit?
While having a negative balance may provide a little extra wiggle room for a future large purchase, it won’t increase your actual credit limit. If you have a balance of negative $100 on a card with a limit of $3,000, your official limit is still $3,000—it will just take you a bit longer to reach that limit since you have a $100 credit.
If you’d like to increase your credit card limit, try one of these three options:
Apply for a new credit card with a higher limit.
Request a higher limit from your credit card issuer.
Check to see if your credit card issuer will automatically boost your limit in the future.
Does overpaying my credit card allow me to profit from interest?
Overpaying your credit card isn’t the same as depositing money into an interest-earning savings account. You don’t earn interest on a negative credit balance—the money simply sits there until it is refunded or until purchases bring the account back to a positive balance.
Take control of your credit today
Lexington Law Firm has a team that can help you understand your credit and address any errors that may be negatively affecting it. Lexington Law Firm also offers continuous credit monitoring services to protect you from fraud and credit-related discrepancies. Ready to take control of your credit? Learn how we can help by getting your free credit assessment today.
Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.
Reviewed By
Sarah Raja
Associate Attorney
Sarah Raja was born and raised in Phoenix, Arizona.
In 2010 she earned a bachelor’s degree in Psychology from Arizona State University. Sarah then clerked at personal injury firm while she studied for the Law School Admissions Test. In 2016, Sarah graduated from Arizona Summit Law School with a Juris Doctor degree. While in law school Sarah had a passion for mediation and participated in the school’s mediation clinic and mediated cases for the Phoenix Justice Courts. Prior to joining Lexington Law Firm, Sarah practiced in the areas of real property law, HOA law, family law, and disability law in the State of Arizona. In 2020, Sarah opened her own mediation firm with her business partner, where they specialize in assisting couples through divorce in a communicative and civilized manner. In her spare time, Sarah enjoys spending time with family and friends, practicing yoga, and traveling.
Home loans for nurses come in various forms, specifically designed to cater to the unique needs of healthcare workers.
Beyond these specialized mortgage options, numerous local and national assistance programs can also offer financial help — like with down payments and closing costs.
Find the best home loan program for you. Start here
However, just because you’re a nurse doesn’t mean a specialized “nurse home loan” is best. You might find you can buy a home more easily with a standard mortgage program. So do your research and choose carefully.
In this article (Skip to…)
Are there special home loans for nurses?
Yes, there are special home loans for nurses that are designed to meet their unique financial and professional circumstances. These specialized mortgage options often come with benefits like lower interest rates, reduced down payments, and more flexible qualification criteria.
Additionally, there are grants for nurses and various local and national assistance programs that provide financial aid. These can be particularly helpful in covering down payments and closing costs, making the home-buying process more accessible, especially for nurses who are first-time homebuyers.
6 best home loans for nurses
When looking for the best home loan programs for nurses, it’s worth considering a mix of both specialized and standard options.
We recommend six mortgage programs in total—two are specialized home loans for nurses, while the other four are standard loan programs open to almost anyone. Surprisingly, you may find that a mainstream mortgage program, rather than a nurse-specific one, ends up being your best fit.
Find the best home loan program for you. Start here
To give a quick overview, the six best home loans for nurses are:
Nurse Next Door program
Homes for Heroes
Conventional mortgages
FHA mortgages
VA mortgages
USDA mortgages
Let’s dig into each program in a little more detail.
1. Nurse Next Door program
The Nurse Next Door1 program is not a “true” mortgage loan program. It does not lend money or originate loans. Rather, it’s a home buyer assistance program that will help match you with the right property, mortgage, and aid program for your needs (if required).
Nurse Next Door provides grants for nurses of up to $8,000 (where available) and down payment assistance of up to $10,681. You may also reduce closing costs by eliminating a home appraisal and other fees.
Keep in mind that grants are generally only awarded to nurses and medical professionals who are first-time buyers purchasing a primary residence. This means that you must refrain from using the funds for an investment property or vacation home.
Before you use this program, though, check that you can’t get more generous grants or loans from your state or local down payment assistance program.
2. Homes for Heroes: Healthcare professionals
Homes for Heroes2 is another nationwide homeowner assistance program that aims to make buying a new home more affordable for firefighters, law enforcement, teachers, military, and medical professionals.
The website says, “Most heroes save at least $3,000 when they buy or sell a home with us. When you add up savings from real estate agents, loan officers, title companies, home inspectors, and other everyday deals, the savings are way beyond what you’ll get from other national programs.”
Note that you must use real estate professionals recommended by Homes for Heroes to benefit. Again, check other local programs to ensure this is your best option before buying.
3. Conventional loans for nurses
Conventional mortgages are the most popular type of home loan available today. These loans are not backed by the government, like others on this list, but most conform to the rules laid down by Fannie Mae and Freddie Mac, which are two government-sponsored enterprises. This is why they’re also referred to as “conforming loans.”
Conventional loans require a credit score of 620 or better. But they offer a low down payment option of only 3% of the purchase price to qualify. Although, if your down payment is less than 20%, you’ll need to pay for private mortgage insurance (PMI), which means higher monthly payments.
4. FHA loans for nurses
Nurses and medical professionals with a credit score between 580 and 620 could opt for a mortgage backed by the Federal Housing Administration, an FHA loan. This type of loan is popular with first-time home buyers because of its flexible approval guidelines.
FHA loans also have a low down payment option of 3.5%. But you will have to pay mortgage insurance premiums (MIP) for the life of the loan. Note that MIP is different from private mortgage insurance on a conventional loan. Still, many FHA buyers simply refinance out of mortgage insurance down the road when their credit scores improve.
Consider opting for a conforming loan if you can. Because of those, you can escape mortgage insurance costs more easily and cheaply.
Verify your FHA loan eligibility. Start here
5. VA loans for nurses
Backed by the Department of Veterans Affairs, a VA loan is an option for nurses who have served or are still serving in the military. If you’re eligible, this will likely be your best bet.
Lenders set their own credit score thresholds, usually between 580 and 660. But you need no down payment. And you’ll be in line for a below-market interest rate, no private mortgage insurance, and low closing costs.
VA buyers must pay a one-time VA funding fee that is typically between 2.3% and 3.6% of the loan amount. However, many borrowers roll this fee into their loan balance, so they don’t have to pay it upfront.
Verify your VA loan eligibility. Start here
6. USDA loans for nurses
The US Department of Agriculture backs USDA mortgages. These, too, require no down payment. But you’ll likely need a score of 640 or better. Similar to the VA loan, a USDA mortgage frequently has lower interest rates than the “going” rate.
You must also meet household income limits and buy a home in a designated rural area. Some suburbs are included. Use the USDA’s maps to find out whether the place where you want to buy is eligible.
Find out if you qualify for a USDA loan. Start here
Grants for nurses
Most of the home loan programs for nurses we highlighted above can be used with down payment assistance (DPA) programs, which could help cover your down payment and closing costs.
Check your home buying options. Start here
All states and many cities and counties offer grants and DPA programs for first-time buyers. There are thousands of these across the country. In some places, you can get home buying assistance running into the tens of thousands of dollars.
Some of these down payment assistance programs offer special privileges to nurses and other essential workers. To find one that covers the area where you want to buy, read this article or check out your state’s page on the Department of Housing and Urban Development (HUD) website.
Note that each DPA sets its own eligibility requirements and caps the amount of money it will grant or lend you. So you’ll have to do a bit of research to find out what you could be in line for and whether you qualify.
Nurse home loans from private lenders
Some private mortgage lenders offer reduced closing costs or other perks for nurses. For example, Homes for Champions (RealFi Home Funding Corp.) says that it’s offering for nurses and doctors can save you “up to 2.00% to 3.00%” by eliminating many fees normally due on closing.
But this company is a licensed direct lender in only 13 states, plus Washington DC: CT, DE, FL, GA, MD, NC, NJ, NY, PA, SC, TX, and VA.
Find the best home loan program for you. Start here
Other companies or organizations also offer help to homebuyers who are nurses.
One such program is the Everyday Hero Housing Housing Assistance Fund. It seems that it refunds seller concessions negotiated by specialist real estate agents. You wouldn’t be alone in assuming that’s a scam. Although it has an A+ rating with the Better Business Bureau. So it may be worth checking out. Remember that seller concessions are hard to obtain in sellers’ markets, which most are at the time of this writing.
Meanwhile, Nurse Home Loan Programs says its goal is “to educate and connect our Nurses with the best home loan solutions for them all over the country.”
It might be worth talking to one of the company’s specialists if your applications are getting rejected. Because that does sometimes happen with lenders that don’t understand nurses’ special working conditions, such as overtime and differential income, or that struggle to grasp the challenges of high student debt and travel nurses’ seemingly chaotic employment records. (More on those and similar challenges below.)
How to overcome home buying challenges as a nurse
Qualifying for a mortgage as a nurse often comes with its own set of hurdles. Lenders are generally focused on income verification, but they may lack a comprehensive understanding of how the nursing profession is structured.
As a result, you might find yourself in the position of having to explain why nurses should be considered a special case in the mortgage application process.
Check your home buying eligibility. Start here
Here are some tips to help you qualify for a nurse home loan.
Nursing income for mortgages
Of course, your basic pay should count toward your qualifying income when applying for a mortgage. But it can become more complicated when it comes to overtime, shift differentials, and “extra” pay.
With those, lenders are likely to look back over the last couple of years to see your average gross pay. If you recently had a schedule change or took on more hours, that might not count toward your income right away.
For example, if you’ve only just started earning the higher hourly rate for night shifts, lenders are unlikely to consider that when deciding how much you can borrow. It might help to get your employer to write the lender, verifying that this will be a long-term arrangement.
You can also write an explanatory letter with your application, telling the lender why you think it should take more of your income into account. Sometimes, this strategy works. But not always.
Travel nurses
Travel nurses sometimes have to seek out lenders that understand their work.
You know that you can hop from contract to contract and agency to agency and never skip a beat, except when you choose to take a vacation. But to a lender, your employment record looks patchy and might suggest you can’t hold down a job.
Again, you can explain to lenders how your employment works. If one won’t listen, move on to those who will.
Student debt
As higher nursing qualifications become more valuable, many nurses take on high levels of student debt. That can affect your home-buying budget because of your debt-to-income ratio (DTI).
Lenders worry that borrowers cannot comfortably afford their mortgage payments and other homeownership costs if they have too many other debts. Unfortunately, student loans can compound that debt burden.
There are ways to drive down your DTI, including paying off big monthly debts with small balances. For example, if your auto loan payments are high but you’ve nearly paid them off, get rid of them before applying for your mortgage.
Nurse.org has an excellent article that goes into more detail about applying for a mortgage as a nurse. And it covers most of what we’ve said and more. You can learn more here.
Listen to The Ask Nurse Alice Podcast!
How to choose the right home loan for nurses
Finding the ideal mortgage is an important step in the home-buying process, and for nurses, this choice may be affected by a number of factors.
While there’s no one-size-fits-all answer, the best home loan for nurse practitioners will depend on individual circumstances such as credit score, down payment, and even military service.
Check your home buying eligibility. Start here
When should nurses consider a VA loan?
If you have served or are currently serving in the military, either as a nurse or in another capacity, a VA loan is likely your best option.
VA loans come with several benefits, including no down payment and no private mortgage insurance (PMI), making them an attractive choice for those who qualify.
When should a nurse choose a conventional loan?
For nurses who have never served in the military but have a good credit score and a decent down payment, a conventional loan is often the next best option.
These loans typically offer competitive interest rates and may require a lower down payment compared to other loan types.
When should nurses use an FHA loan?
If your credit score falls within the 580–619 range, an FHA loan might be your best bet. The Federal Housing Administration is backing these loans, which are more forgiving of lower credit scores.
However, they do require an upfront mortgage insurance premium and ongoing monthly premiums.
When should a nurse choose a USDA loan?
Lastly, for nurses and eligible healthcare workers with limited savings who are looking to buy in a rural area, a USDA loan could be the perfect fit, provided your household income meets the eligibility criteria.
These loans offer 100% financing, meaning no down payment is required, and they also have lower mortgage insurance costs.
FAQ: Home loans for nurses
Do nurses get discounts on mortgages?
Yes, there are special home loan programs for nurses that offer discounts on mortgages. These programs are designed to assist healthcare professionals like registered nurses, nurse practitioners, and even travel nurses in buying a home. The discounts may vary by state and lender, so it’s a good idea to shop around and inquire about home loan assistance for nurses.
Is it easier for nurses to get a mortgage?
While nurses may have stable incomes, the mortgage application process can be complex due to the unique structure of nursing pay, which often includes overtime and shift differentials. Travel nurses may face additional hurdles as their employment can appear inconsistent to lenders. However, there are home loan programs for nurse practitioners that offer relaxed qualification criteria, making the mortgage application process more straightforward.
Do nurses get better interest rates?
While various factors, such as credit score and debt-to-income ratio, affect interest rates, nurses may be able to obtain better interest rates through specialized home loan programs. These programs may offer competitive rates as part of the package. It’s advisable to consult with different lenders to find the best loan type in terms of interest rates.
Can I get a mortgage as a new nurse?
Absolutely, you can get a mortgage as a new nurse. Many lenders offer home loan programs for nurses that don’t require a long employment history in the field. However, you may need to provide proof of employment and your nursing license. If you’re a first-time home buyer, there are also specific loans tailored to your needs, like first-time home buyer loans for nurses.
Are there home loans for nurses?
Yes, there are home loans for nurses with bad credit. While having a lower credit score can be a hurdle in the mortgage application process, certain programs are designed to help nurses overcome this challenge. FHA loans, for example, are more forgiving of lower credit scores and may be a suitable option if your credit falls within the 580–619 range. Additionally, some specialized nurse home loan programs offer more flexible qualification criteria, which can be beneficial for those with less-than-perfect credit. It’s always a good idea to consult with a mortgage advisor to explore all your options.
What are today’s mortgage rates?
Nurses can often find excellent deals when they take advantage of healthcare-oriented mortgage and assistance programs.
But don’t stop at finding the right loan program. You should also shop around for the best mortgage lender.
Each lender you apply to will probably present you with a different set of mortgage rates and closing costs. So get quotes from several and pick the one with the best deal for you.
Time to make a move? Let us find the right mortgage for you
After nearly two years of trudging through a frozen housing market, the consensus among mortgage professionals is that the worst of it is over.
The Federal Reserve recently signaled plans to slash interest rates three times in 2024, shifting toward the next phase in its monetary policymaking.
“It finally seems like we are turning a corner and that’s good news after two years of the Fed’s negative perspective that we’ve heard,” Max Slyusarchuk, CEO of A&D Mortgage, said in an interview.
The spread between the 30-year fixed-rate mortgage and the 10-year Treasury yield has narrowed after sitting at over 300 basis points, compared to the historic norm of 150 bps.
But how much will the decline in mortgage rates and a narrowing of the spreads breathe life into the dour origination landscape?
“At the end of the day if mortgage rates come down, I don’t just think that’s gonna solve the inventory problem right away,” said Ben Cohen, managing director at Guaranteed Rate.
“There’s still going to be a lag. So my concern is that rates are going to come down but inventory is not going to just all of a sudden be plentiful and now we’re in a situation where home prices get driven up because there is still low inventory. You have all these buyers that have been waiting for rates to come back and now they’re back and all this becomes really competitive again.”
Mortgage professionals say 2024 will be a ‘recovery year’ as markets slowly return to normal. But a combination of factors – high home prices, lack of inventory, elevated rates — temper expectations for even a moderately strong year.
HousingWire interviewed a dozen loan officers and mortgage executives about their strategies for 2024, which mortgage products they expect to be in demand, and the magic rate needed to get sellers and buyers back in the market.
Strategies for 2024
I’m heavily focused on recruiting, improving technology and marketing, empowering the loan officers — by giving them the same technology and marketing support. Whatever I have for me, I will do it for them as well. This way I can help them grow their business.
We will use AI to help with customer service. AI can understand the loan status, a loan profile and AI can respond to the consumer. If they want to know what’s going on with rates, their loan, AI can give them an answer.
The second project I’m working on is having a mobile app where the the client can download the app and use it to take care of their transaction. We are going to shift to using a mobile app so we don’t have to use phone calls, emails and text messages anymore.
— Thuan Nguyen, CEO of Loan Factory, Inc.
A lot of what you hear is very cliche-ish. You have to make more calls, got to call on more people — all that is true.
But I think it’s more complex than that.
A successful loan officer in this market needs a very capable qualified assistant. I think they need to have all systems firing, meaning they’ve got to do the traditional stuff where you’re doing broker open houses, you’re going to open houses, you are doing coffee clutches and breakfasts and all that.
Simultaneous to that, I think you got to be heavily engaged in what I call the ‘virtual war’ and that means you’re driving your social media and you’re in your your subscribing to systems that drive alerts to your database’s activity. And then you have to have a process in a system to manage those alerts and have outreach to those alerts to where you’re capitalizing on them in a quick time.
— John Palmiotto, chief production officer at The Money Store
What people who don’t understand marketing have done is unintentional marketing. They’re just doing what they see everybody else doing and what we’re finding is those who are succeeding today and are going to thrive in 2024 have a lot of intention in their social media.
It’s not social media, it’s social networking. Networking has always been a key component to drive growth and fostering true community with your referral partners and your sphere of influence. So you have to be intentional, you have to be very strategic – understanding the audience that you’re going after and leveraging it as a social networking platform.
— Shane Kidwell, CEO of Dwell Mortgage
We’re now having to put in work every day without necessarily reaping the immediate reward. Staying disciplined to putting in the effort every single day at the absolute highest level even though we’re not going to see the immediate reward.
We’re laying the constant groundwork word doing the agent training. We’re doing it to where some of that is not reaping us rewards here. It’s that type of mindset that we have to have, because luck is hard work meeting opportunity.
— Matt Weaver, VP of mortgage sales at CrossCountry Mortgage
I recently got licensed in the state of Ohio because that’s where I’m from. I have a lot of connections in Ohio. I’m comfortable with lending there because I know I’m very familiar with the area. I think a lot of my friends and family members and circle of influence up there are going to be refinancing in the next six, 12, 18 months and I want to be licensed and ready to go when that time comes so that I can help them.
— Justin McCrone, loan officer at Atlantic Coast Financial Services
Origination goals
I would be happy with doing $65 million to $75 million next year. I left and joined Revolution in 2023 for a couple months with no origination, I’m probably gonna hover around $50 million this year, whereas I did $100 million in 2022 at Guaranteed Rate.
— Larry Steinway, senior vice president of mortgage lending and branch manager of Revolution Mortgage
The Mortgage Bankers Association (MBA) has a report on where they think the business is going, you have Fannie Mae on where they think the business is going. We look at all that and then we look at the size of the sales team, who we’ve recruited, what we think how much business will pick up.
I think the first quarter is going to be tough. And I think it’ll pick up once you get past the first quarter spring market and on. So we’re planning for a 20% increase.
— Jon Overfelt, director of sales and principal at American Security Mortgage Corp.
I think I’m doing marginally better than this year. We’re now looking at a declining rate environment versus the rising rate environment. So that will allow people to be more optimistic. I would imagine we’ll be about 10 to 15% better next year than this year.
— Robby Oakes, managing director at CIMG Residential Mortgage
Popular products
Given the rate cycle over the past two years and the record level of available home equity that consumers are sitting on, the second mortgage market is a huge opportunity for originators to serve the cash-out and debt consolidation needs of their clients without touching their low rate first mortgage, make much needed origination income and keep the client close so they can service them again in the next cycle. Home equity is really a no-brainer today.
Non-QM is also a huge opportunity for originators to serve the needs of their clients and make much needed origination income. Originators will be battling it out again next year for purchase and refinance volume again that fall into the standard agency, government, jumbo buckets. The rate and term and cash-out refinance market will rely on rates decreasing, but even if they move to 6% next year, the industry will struggle with refinances.
— Paul Saurbier, SVP of strategy at Spring EQ
There’s a big push for home affordability. So there’s a lot of programs out there for first-time homebuyers based on where they’re actually buying their home and what their income is. There’s incentives for those people to get into the home a little bit cheaper than who’s already been a homeowner and can’t take advantage of those programs.
So to me, it’s still a big first-time buyer market in 2024. I’m not saying there are people that are existing but the people that are existing homeowners are only going to move if they absolutely have to move.
–Ben Cohen, managing director at Guaranteed Rate
I think for sure the non-QMs – the more flexible guideline programs are going to continue to be big, especially for people who are investors or self-employed aging populations.
Obviously for people with good credit, good income, solid assets, the 30-year fixed conventional mortgages is the most amazing program that exists for consumers because you don’t have any risk if rates go up and if rates go down you get to refinance and get a lower rate.
I don’t know if it’s national, but 30% of deals right [in my market in California] now are all-cash and so competing against all-cash is still going to be a concern for folks. So that means our job is not only to get them educated on their loan options, but also to make sure we are solid so we get fully underwritten files, making sure we do a lot of work on the front-end so we’re not missing out on deals.
— Brady Thomas, branch manager at American Pacific Mortgage
Home equity products will continue to be attractive options for homeowners looking for specific needs. Based on the goals of the homeowner, Adjustable Rate Mortgages (ARMs) may offer some flexibility. As rates start to tick down throughout 2024, traditional refinances will begin to make more financial sense, as well.
— Michael Merritt, SVP of customer care and default mortgage servicing at BOK Financial
Magic rate?
I would say 5.5%. But the issue is home prices are too high. In order to have the market return to normal, they have to come down a lot more. If rates and prices both come down, it’s easier. But this time, the price might not come down so we have to rely on the rates.
— Thuan Nguyen – CEO of Loan Factory, Inc.
When we get rates in the 5%, I think it’s gonna be fun to be in this business again because people will be willing to leave their 3% interest rate. I think we are going to see (traditional) refinancing transactions really start to kick in in the second half of 2024, 2025.
— Larry Steinway, senior vice president of mortgage lending and branch manager of Revolution Mortgage
I think if we get rates to come down into the 5% range, that’s going to help quite a bit. If people got rates of 7% and 7.5% and they can get a rate at 5%, that’s a refi boom for all of those buyers.
I think rates in the 5%-range or low 6% levels will bring buyers back to the market, but I don’t think we would get a ton of sellers until we have rates in the 4% or low 5%. Somebody who might want to move because they need an extra bedroom or want a bigger backyard won’t move if rates are still at 6% and they’re going from a rate of 3%. But they might do it if they’re getting 4.5%.
— Brady Thomas, branch manager at American Pacific Mortgage
Business was really busy when they were in the low 6% range and the high 5% levels. If you look back earlier in the year when we had the banking crisis hit, business picked up a lot then and that’s about where rates were – in the high 5%, low 6%. I think somewhere in there, you would see a pretty good pickup.
— Jon Overfelt, director of sales and principal at American Security Mortgage Corp.
The question people should be asking is at what rate threshold will sellers come back into the market. Given the average mortgage rate is 3.7%, and considering the pent-up deferred sales pressure is growing each day, our view is that somewhere around 5.5% will be a key threshold to attract sellers in a way that brings supply-demand parity into closer balance.
— Jack Macdowell, chief investment officer at Palisades Group
The number will be different based on the goal of the customer. If customers are looking for home improvement, debt consolidation or other spending goals, Home equity products can be positive at current rates. As rates work back towards 6%, I think you will begin to see more refinance options open up.
— Michael Merritt, SVP of customer care and default mortgage servicing at BOK Financial
Our definition of a magic number indicates the rate at which more than half of the buyers are willing to buy. We have an analytical department that analyzes the purchasing power of the U.S. in the past 40 years and they are saying it’s 6.25%. At 6.25%, a majority of people would say, ‘I’m OK to buy.’ That’s when supply and demand will equalize and your property is not going to drop or rise in value.
Our goal here at Credible Operations, Inc., NMLS Number 1681276, referred to as “Credible” below, is to give you the tools and confidence you need to improve your finances. Although we do promote products from our partner lenders who compensate us for our services, all opinions are our own.
The interest rate on a 30-year fixed-rate mortgage is 6.375% as of December 26, which is unchanged from Friday. Additionally, the interest rate on a 15-year fixed-rate mortgage is 5.875%, which is 0.500 percentage points higher than Friday.
With mortgage rates changing daily, it’s a good idea to check today’s rate before applying for a loan. It’s also important to compare different lenders’ current interest rates, terms, and fees to ensure you get the best deal.
Rates last updated on December 26, 2023. Rates are based in Texas and the assumptions are shown here. Actual rates may vary. Credible, a personal finance marketplace, has 5,000 Trustpilot reviews with an average star rating of 4.7 (out of a possible 5.0).
How do mortgage rates work?
When you take out a mortgage loan to purchase a home, you’re borrowing money from a lender. In order for that lender to make a profit and reduce risk to itself, it will charge interest on the principal — that is, the amount you borrowed.
Expressed as a percentage, a mortgage interest rate is essentially the cost of borrowing money. It can vary based on several factors, such as your credit score, debt-to-income ratio (DTI), down payment, loan amount, and repayment term.
After getting a mortgage, you’ll typically receive an amortization schedule, which shows your payment schedule over the life of the loan. It also indicates how much of each payment goes toward the principal balance versus the interest.
Near the beginning of the loan term, you’ll spend more money on interest and less on the principal balance. As you approach the end of the repayment term, you’ll pay more toward the principal and less toward interest.
Your mortgage interest rate can be either fixed or adjustable. With a fixed-rate mortgage, the rate will be consistent for the duration of the loan. With an adjustable-rate mortgage (ARM), the interest rate can fluctuate with the market.
Keep in mind that a mortgage’s interest rate is not the same as its annual percentage rate (APR). This is because an APR includes both the interest rate and any other lender fees or charges.
Mortgage rates change frequently — sometimes on a daily basis. Inflation plays a significant role in these fluctuations. Interest rates tend to rise in periods of high inflation, whereas they tend to drop or remain roughly the same in times of low inflation. Other factors, like the economic climate, demand, and inventory can also impact the current average mortgage rates.
To find great mortgage rates, start by using Credible’s secured website, which can show you current mortgage rates from multiple lenders without affecting your credit score. You can also use Credible’s mortgage calculator to estimate your monthly mortgage payments.
What determines the mortgage rate?
Mortgage lenders typically determine the interest rate on a case-by-case basis. Generally, they reserve the lowest rates for low-risk borrowers — that is, those with a higher credit score, income, and down payment amount. Here are some other personal factors that may determine your mortgage rate:
Location of the home
Price of the home
Your credit score and credit history
Loan term
Loan type (e.g., conventional or FHA)
Interest rate type (fixed or adjustable)
Down payment amount
Loan-to-value (LTV) ratio
DTI
Other indirect factors that may determine the mortgage rate include:
Current economic conditions
Rate of inflation
Market conditions
Housing construction supply, demand, and costs
Consumer spending
Stock market
10-year Treasury yields
Federal Reserve policies
Current employment rate
How to compare mortgage rates
Along with certain economic and personal factors, the lender you choose can also affect your mortgage rate. Some lenders have higher average mortgage rates than others, regardless of your credit or financial situation. That’s why it’s important to compare lenders and loan offers.
Here are some of the best ways to compare mortgage rates and ensure you get the best one:
Shop around for lenders: Compare several lenders to find the best rates and lowest fees. Even if the rate is only lower by a few basis points, it could still save you thousands of dollars over the life of the loan.
Get several loan estimates: A loan estimate comes with a more personalized rate and fees based on factors like income, employment, and the property’s location. Review and compare loan estimates from several lenders.
Get pre-approved for a mortgage: Pre-approval doesn’t guarantee you’ll get a loan, but it can give you a better idea of what you qualify for and at what interest rate. You’ll need to complete an application and undergo a hard credit check.
Consider a mortgage rate lock: A mortgage rate lock lets you lock in the current mortgage rate for a certain amount of time — often between 30 and 90 days. During this time, you can continue shopping around for a home without worrying about the rate changing.
Choose between an adjustable- and fixed-rate mortgage: The interest rate type can affect how much you pay over time, so consider your options carefully.
One other way to compare mortgage rates is with a mortgage calculator. Use a calculator to determine your monthly payment amount and the total cost of the loan. Just remember, certain fees like homeowners insurance or taxes might not be included in the calculations.
Here’s a simple example of what a 15-year fixed-rate mortgage might look like versus a 30-year fixed-rate mortgage:
15-year fixed-rate
Loan amount: $300,000
Interest rate: 6.29%
Monthly payment: $2,579
Total interest charges: $164,186
Total loan amount: $464,186
30-year fixed-rate
Loan amount: $300,000
Interest rate: 6.89%
Monthly payment: $1,974
Total interest charges: $410,566
Total loan amount: $710,565
Pros and cons of mortgages
If you’re thinking about taking out a mortgage, here are some benefits to consider:
Predictable monthly payments: Fixed-rate mortgage loans come with a set interest rate that doesn’t change over the life of the loan. This means more consistent monthly payments.
Potentially low interest rates: With good credit and a high down payment, you could get a competitive interest rate. Adjustable-rate mortgages may also come with a lower initial interest rate than fixed-rate loans.
Tax benefits: Having a mortgage could make you eligible for certain tax benefits, such as a mortgage interest deduction.
Potential asset: Real estate is often considered an asset. As you pay down your loan, you can also build home equity, which you can use for other things like debt consolidation or home improvement projects.
Credit score boost: With on-time payments, you can build your credit score.
And here are some of the biggest downsides of getting a mortgage:
Expensive fees and interest: You could end up paying thousands of dollars in interest and other fees over the life of the loan. You will also be responsible for maintenance, property taxes, and homeowners insurance.
Long-term debt: Taking out a mortgage is a major financial commitment. Typical loan terms are 10, 15, 20, and 30 years.
Potential rate changes: If you get an adjustable rate, the interest rate could increase.
How to qualify for a mortgage
Requirements vary by lender, but here are the typical steps to qualify for a mortgage:
Have steady employment and income: You’ll need to provide proof of income when applying for a home loan. This may include money from your regular job, alimony, military benefits, commissions, or Social Security payments. You may also need to provide proof of at least two years’ worth of employment at your current company.
Review any assets: Lenders consider your assets when deciding whether to lend you money. Common assets include money in your bank account or investment accounts.
Know your DTI: Your DTI is the percentage of your gross monthly income that goes toward your monthly debts — like installment loans, lines of credit, or rent. The lower your DTI, the better your approval odds.
Check your credit score: To get the best mortgage rate possible, you’ll need to have good credit. However, each loan type has a different credit score requirement. For example, you’ll need a credit score of 580 or higher to qualify for an FHA loan with a 3.5% down payment.
Know the property type: During the loan application process, you may need to specify whether the home you want to buy is your primary residence. Lenders often view a primary residence as less risky, so they may have more lenient requirements than if you were to get a secondary or investment property.
Choose the loan type: Many types of mortgage loans exist, including conventional loans, VA loans, USDA loans, FHA loans, and jumbo loans. Consider your options and pick the best one for your needs.
Prepare for upfront and closing costs: Depending on the loan type, you may need to make a down payment. The exact amount depends on the loan type and lender. A USDA loan, for example, has no minimum down payment requirement for eligible buyers. With a conventional loan, you’ll need to put down 20% to avoid private mortgage insurance (PMI). You may also be responsible for paying any closing costs when signing for the loan.
How to apply for a mortgage
Here are the basic steps to apply for a mortgage, and what you can typically expect during the process:
Choose a lender: Compare several lenders to see the types of loans they offer, their average mortgage rates, repayment terms, and fees. Also, check if they offer any down payment assistance programs or closing cost credits.
Get pre-approved: Complete the pre-approval process to boost your chances of getting your dream home. You’ll need identifying documents, as well as documents verifying your employment, income, assets, and debts.
Submit a formal application: Complete your chosen lender’s application process — either in person or online — and upload any required documents.
Wait for the lender to process your loan: It can take some time for the lender to review your application and make a decision. In some cases, they may request additional information about your finances, assets, or liabilities. Provide this information as soon as possible to prevent delays.
Complete the closing process: If approved for a loan, you’ll receive a closing disclosure with information about the loan and any closing costs. Review it, pay the down payment and closing costs, and sign the final loan documents. Some lenders have an online closing process, while others require you to go in person. If you are not approved, you can talk to your lender to get more information and determine how you can remedy any issues.
How to refinance a mortgage
Refinancing your mortgage lets you trade your current loan for a new one. It does not mean taking out a second loan. You will also still be responsible for making payments on the refinanced loan.
You might want to refinance your mortgage if you:
Want a lower interest rate or different rate type
Are looking for a shorter repayment term so you can pay off the loan sooner
Need a smaller monthly payment
Want to remove the PMI from your loan
Need to use the equity for things like home improvement or debt consolidation (cash-out refinancing)
The refinancing process is similar to the process you follow for the original loan. Here are the basic steps:
Choose the type of refinancing you want.
Compare lenders for the best rates.
Complete the application process.
Wait for the lender to review your application.
Provide supporting documentation (if requested).
Complete the home appraisal.
Proceed to closing, review the loan documents, and pay any closing costs.
FAQ
What is a rate lock?
Interest rates on mortgages fluctuate all the time, but a rate lock allows you to lock in your current rate for a set amount of time. This ensures you get the rate you want as you complete the homebuying process.
What are mortgage points?
Mortgage points are a type of prepaid interest that you can pay upfront — often as part of your closing costs — for a lower overall interest rate. This can lower your APR and monthly payments.
What are closing costs?
Closing costs are the fees you, as the buyer, need to pay before getting a loan. Common fees include attorney fees, home appraisal fees, origination fees, and application fees.
If you’re trying to find the right mortgage rate, consider using Credible. You can use Credible’s free online tool to easily compare multiple lenders and see prequalified rates in just a few minutes.
Nearly two-thirds of college graduates leave school with debt, which means many couples have to manage outstanding student loans after they get married. If you and your spouse each have multiple student loans, you could potentially end up with a large number of loans to manage in one household. That might make the idea of consolidating student loans with your spouse appealing. So, can you do it? And, if so, is it a good idea?
Yes — and maybe.
The federal government no longer offers spousal consolidation of federal student loans. However, you may be able to combine your federal or private loans by refinancing with a private lender. Whether or not that’s a wise move will depend on a number of factors, including the types of loans you have and your interest rates.
Here’s a look at options available for consolidating your loans as a couple, plus other ways to make student loan payments more manageable after marriage.
Consolidating Federal Loans
Consolidating is the process of combining your loans so you only have to make one payment and keep track of one due date, rather than several. Individual borrowers can consolidate their federal student loans through the federal government.
When you consolidate federal loans, the government pays them off and replaces them with a Direct Consolidation Loan. Your new fixed interest rate will be the weighted average of your previous rates, rounded up to the next one-eighth of 1%.
Previously, married federal student loan borrowers could consolidate their loans together through a joint consolidation loan. However, the government ended that program in 2006 and no longer offers federal loan borrowers a way to consolidate student debt with a spouse.
Currently, the only way to consolidate federal student loans with a spouse is through refinancing with a private lender. This involves taking out a new, larger student loan to pay off all of your existing loans. The lender will base your new loan’s interest rate on your combined income and creditworthiness, and both of you will be listed as primary borrowers on the loan.
It’s important to note that consolidating in this way will convert those federal loans into private loans, which removes all federal benefits and protections, such as income-driven repayment plans and student loan forgiveness programs. 💡 Quick Tip: Get flexible terms and competitive rates when you refinance your student loan with SoFi.
Refinancing Student Loans With Your Spouse as a Cosigner
Another way to commingle student loan repayment responsibility is to apply for refinancing with your spouse as a cosigner (or vice versa). While your loans won’t be consolidated together if you’re approved, you’ll share ownership of the loan with your spouse. This could be a good idea if you would not be able to qualify for a refinancing on your own or could qualify for a better rate if your spouse serves as a cosigner, due to their added income and/or good credit.
An advantage of cosigning versus joint consolidation is that some lenders allow you to eventually remove a cosigner from a loan, which could be useful should you ever part ways. Joint refinancing, on the other hand, generally doesn’t have an “out” clause.
Recommended: Student Loan Consolidation vs Refinancing
How to Combine Student Loans With Your Spouse
If you’re interested in combining student loans with your spouse, here’s a look at the steps involved in a joint refinance.
1. Find a lender. You’ll need to find a lender that offers joint refinancing (not all do). Ideally, you’ll want to shop around and compare offers from multiple lenders to make sure you find the best deal. Browsing around and receiving prequalified rates won’t affect your credit, since companies will do a “soft” credit check.
2. Apply for the loan. Once you find a lender you want to work with, you’ll need to choose which loans you want to consolidate (you don’t have to include every loan you have) and officially apply for the loan. Both you and your spouse will need to supply personal and financial information.
3. Review your documents and sign. Once approved, it’s a good idea to carefully review all the documents you receive and check the fine print before signing anything. Confirm the loan terms you were approved for match the ones you applied for.
4. Keep paying your individual loans until the refinance is complete. When you refinance a loan, your new lender must then pay off your old lender. It may take a little while for that process to finalize. In the meantime, it’s important for you and your spouse to continue making your payments on your individual loans until you’ve received notice from your new lender that the debt transfer is complete.
Recommended: Pros and Cons of Refinancing Student Loans
Advantages of Consolidating Student Loans With Your Spouse
Combining your student loans with your spouse’s through refinancing comes with certain advantages. Here are some to consider:
• Simplified repayment Rather than juggling multiple student loan payments and due dates, you and your spouse will only have one payment to make.
• A potentially lower rate If your spouse has better credit or a higher income than you, refinancing with your spouse may allow you to qualify for a lower interest rate than you’d get on your own. Together, you could potentially save money.
• You could lower your payment You may be able to lower your monthly payment by getting a lower interest rate and keeping the same repayment term. You can also lower your payment by extending your loan term. (Note: You may pay more interest over the life of the loan if you refinance with an extended term.)
• Fosters teamwork When you combine student loans with your spouse, there’s no longer separate debt. You have one joint goal you’re working towards as a team.
Recommended: Making Important Money Decisions in Marriage
Disadvantages of Consolidating Student Loans With Your Spouse
Although consolidating student loans with your spouse can seem appealing, there are some significant drawbacks to keep in mind:
• Few lenders offer it Only a small number of lenders offer spousal student loan consolidation. With few options to choose from, you may have trouble getting approved or finding a competitive interest rate.
• Loss of federal protections If you or your spouse have federal student loans and you refinance them, they become private student loans. You’ll lose federal loan benefits and protections, including the ability to enroll in an income-driven repayment plan and access to federal forbearance or deferment options.
• Divorce could be messy When you refinance your student loans with your spouse, you are taking on a new loan together. If you end up divorcing, you’ll still be legally obligated for the combined debt and you’ll have to work out payment terms with your former spouse as part of the divorce agreement.
• You might not lower your rate In most cases, refinancing only makes sense if you can get a lower interest rate. This is especially true if you have federal loans because you give up many protections by refinancing.
Other Ways to Tackle Student Debt as a Couple
A joint refinance isn’t the only way to manage your combined student debt load. Here are some other tips for how to manage student debt as a married couple.
• Be honest — with yourself and your spouse Having a high student loan balance might feel overwhelming, but avoiding your debt or hiding it from your spouse can affect your relationship. You can start by getting acquainted with exactly how much you each owe, your interest rates, and the loan terms.
• Know your repayment options If you have federal loans, it can be helpful to read up on the different plans available for student loan repayment and the pros and cons of each. If you’re having trouble making payments, you can look into income-driven repayment plans or other federal loan forgiveness programs. Speak to your loan servicer(s) if you’re concerned with your ability to repay your total loans as a couple.
• Consider consolidating separately If your or your spouse has multiple federal student loans, consolidating with a Direct Consolidation Loan can help you better manage the loans you have in your name. If you have loans other than Direct Loans, it can also give you access to additional repayment options. Federal consolidation won’t lower your rate, however. It could also extend your loan term, which would increase your overall costs.
• Look into refinancing separately If you (or your spouse) has higher-interest graduate PLUS loans, Direct Unsubsidized Loans, and/or private loans, refinancing could help you get a lower rate, a lower payment, or both. Keep in mind that refinancing federal student loans with a private lender means giving up federal benefits. And, if you opt for a longer loan term, you could end up spending more over the life of the loan.
💡 Quick Tip: It might be beneficial to look for a refinancing lender that offers extras. SoFi members, for instance, can qualify for rate discounts and have access to career services, financial advisors, networking events, and more — at no extra cost.
Figuring Out the Financial Path that’s Right for You
While you and your partner can’t jointly refinance your student loans with the federal government, you may be able to find a private lender that offers a spouse consolidation loan. Other ways to manage student loan repayment after marriage include: listing all of your loans and coming up with a repayment strategy together, re-evaluating your payments plans, and looking into consolidating or refinancing your loans separately.
Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.
With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.
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SoFi Student Loan Refinance If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.
SoFi Loan Products SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Balloon mortgages are short-term home loans that allow borrowers to make small monthly payments — or no payments at all — for several years. After that initial period is over, though, the remaining balance is due in one lump sum.
There are circumstances where a balloon mortgage is appealing, but they come with significant risk to both the borrower and the lender. Because of that, it can be difficult to find a lender willing to finance a balloon mortgage.
Here’s what you need to know about balloon mortgages, including what they are, benefits and drawbacks and whether or not they’re right for you.
What we’ll cover
What is a balloon mortgage and how does it work?
Unlike traditional 15-year or 30-year mortgages, balloon mortgages have much shorter loan terms, typically just five to seven years.
In most cases, borrowers make small fixed monthly payments, though in some cases no payment is required at all. The catch, however, is that when the initial period is over, you have to make a “balloon” payment — one large installment that covers the remaining balance and any fees
Types of balloon mortgages
There are three common types of balloon mortgages.
No-payment balloon mortgage
With a no-payment balloon mortgage, the borrower typically doesn’t need to make a payment for a short period, usually five or seven years, though interest continues to accrue. After that, they must pay the full amount due, plus any interest.
Interest-only balloon mortgage
An interest-only balloon mortgage means the borrower makes monthly payments only on the interest their loan is accruing. At the end of the loan term, they just have to pay back the principal.
Borrowers tend to build equity on their house more slowly with this type of balloon mortgage.
Balloon payment mortgage
With a balloon payment mortgage, borrowers are responsible for paying the interest on a 15- or 30-year mortgage over a much shorter timeframe, typically five or seven years.
Who are balloon mortgages for?
What kind of buyer would a balloon mortgage make sense for? Borrowers who:
Already have the full payment.
Plan to sell the home.
Expect an inheritance or income increase.
Expect to refinance their mortgage during the loan period.
Since none of these scenarios are guaranteed, there is significant risk involved.
Pros and cons of balloon mortgages
Balloon mortgages have their benefits, as well as many pitfalls. With so much risk, it’s important to talk with a financial advisor before deciding if balloon mortgages are right for you.
Pros
Funds that would otherwise go toward larger initial payments can accrue interest.
You may get the loan faster than with a traditional mortgage.
Lenders may be more willing to finance borrowers who don’t have good credit.
You may be able to avoid taking out private mortgage insurance.
Cons
There’s more risk you’ll default.
It’s harder to get refinancing.
If you’re only paying interest, you’re not building home equity.
Other mortgage options
If you’re wary of such a risky proposition, there are other ways for nontraditional borrowers to finance their home purchase. Rocket Mortgage is CNBC’s top pick for homebuyers with low credit scores: While a 620 is required for most home loans, Rocket considers applicants with scores as low as 580.
The company offers mortgages as low as 3.5% down and applicants can get pre-qualified online in minutes.
Rocket Mortgage
Annual Percentage Rate (APR)
Apply online for personalized rates
Types of loans
Conventional loans, FHA loans, VA loans and Jumbo loans
Terms
8 – 29 years, including 15-year and 30-year terms
Credit needed
Typically requires a 620 credit score but will consider applicants with a 580 credit score as long as other eligibility criteria are met
Minimum down payment
3.5% if moving forward with an FHA loan
Terms apply.
Awarded CNBC Select’s best mortgage for saving money, SoFi offers up to $9,500 in cash back if you buy your home through the SoFi Real Estate Center.
You can get a mortgage with as little as 3% down and a 0.25% discount is available for signing a 30-year mortgage.
SoFi
Annual Percentage Rate (APR)
Apply online for personalized rates; fixed-rate and adjustable-rate mortgages included
Types of loans
Conventional loans, jumbo loans, HELOCs
Terms
10 – 30 years
Credit needed
Minimum down payment
Terms apply.
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Bottom line
Because they’re shorter than traditional home loans and require a big lump payment, Balloon mortgages are riskier than typical home financing options. Buyers counting on a change in fortune or to flip the property may want to consider a balloon mortgage, but they should explore other options first.
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