Financing Options

According to the National Association of REALTORS®, nearly nine out of ten buyers do not have the necessary cash to purchase a home without mortgage financing.  As a result, nearly all buyers will need to obtain a mortgage loan to complete their home purchase.

As a potential homebuyer, there are many loan products available on the market that may suit your individual needs and financial circumstances.  In finding the best loan product for your individual needs, you should feel free to shop around with multiple mortgage lenders to find the best product with the lowest fees and the best interest rate. 

Each of these types of home loans are offered by a variety of lenders, each one with its own unique terms and conditions.  Comparison shopping and good information gathering are the keys to finding the loan that will best suit your individual needs.

Although the number and variety of financing options may appear to be daunting at first, most mortgage loans fall into one of several different categories of financing options.  In order to get you started, YourKansasHome.org will summarize the major types of financing options below.

Conventional Fixed-Rate Mortgages:  A conventional fixed-rate mortgage is the traditional mortgage loan option with a constant interest rate and payment that allows the home buyer to pay off the mortgage over a fixed amount of time, normally 15 or 30 years.  While a conventional fixed-rate mortgage loan will have a slightly higher initial interest rate compared to an adjustable-rate mortgage (ARM), the biggest benefit is the predictability of the monthly payment for principal and interest over the life of the mortgage loan.  

Conventional Adjustable-Rate Mortgages (ARMs):  A conventional adjustable-rate mortgage is an alternative mortgage loan where the interest rate and payment on the loan will vary over the life of the loan along with a pre-determined benchmark interest rate or index.  Although the adjustable-rate mortgage normally offers a slightly lower initial interest rate for an initial term (such as two to three years), the interest rate will either increase or decrease over the life of the mortgage loan, which can lead to increased costs for a home buyer who is planning to hold the property for a long period of time. 

Conventional Jumbo Loans:  A conventional jumbo loan is a mortgage loan where the purchase price of the home exceeds the maximum amounts that are eligible for secondary financing from government-backed enterprises Fannie Mae and Freddie Mac.  As a result, conventional jumbo mortgage loans that are not financed through the government-backed enterprises normally come with higher fees and interest rates due to the slightly higher risk to the mortgage lender.

Federal Housing Administration (FHA) Mortgages:  A Federal Housing Administration (FHA) mortgage loan is a mortgage loan issued by a mortgage lender that is guaranteed by the Federal Housing Administration (FHA).  FHA mortgage loans offer various potential benefits to a home buyer, including a potential for a slightly lower down payment requirement of 3.5%, lower closing costs and less stringent credit qualification requirements.  

USDA Rural Housing Mortgages:  A United States Department of Agriculture (USDA) rural housing mortgage loan is a mortgage loan issued by a mortgage lender that is guaranteed by the United States Department of Agriculture (USDA).  The USDA guaranteed mortgage loan offers various potential benefits to home buyers, including a potential for no down payment (with financing up to 100%), lower closing costs and less stringent credit qualification requirements.  Unfortunately, USDA mortgage financing is only available in certain rural communities with relatively small populations.

Veterans Administration (VA) Mortgages:  A Veterans Administration (VA) mortgage loan is a mortgage loan issued by a mortgage lender that is guaranteed by the Veterans Administration (VA).  The VA mortgage loan offers various potential benefits to home buyers, including a potential for no down payment (with financing up to 100%), lower closing costs and less stringent credit qualification requirements.  Unfortunately, VA mortgage loans are only available to certain individuals who have served in the military or spouses of certain military veterans. 

For a more detailed discussion on potential financing options that suit your particular characteristics, please refer to the Financial Assistance Programs sections of this website.