Imagine this scenario for a minute: You’ve found the perfect NHC home for you and your family. The price is unbeatable. You’ll now have more bedrooms than you need. You’re eager to close as quickly as possible. But, you’re not entirely sure where to go for financing. Don’t worry. Getting a loan can be confusing for most homebuyers—especially those looking to find their first house. That’s where we come in. At NHC, we not only offer the lowest prices per square foot on newly constructed homes across Texas, North Carolina, Alabama, and Florida, but we also help our homebuyers secure fair, affordable financing. In this blog, we’ll break down everything from the types of home loans you could secure to how certain home builders like NHC can help you save on closing costs.

If you’d like to learn more about how we’ll save you money on your new home, click here to contact our team. But we digress. Let’s get back to home loans, shall we?

The Types of Home Loans You Could Secure

Unless you have enough cash saved up to buy your new home in full, you’ll likely need to get a mortgage. And that’s ok. Most homebuyers (about 62%, in fact) get some form of a mortgage to help pay for their home over time. So, what are your options?

Conventional

The first type of home loan you could secure is a conventional loan. Simply put, a conventional loan is a home financing option that is not provided by a government agency. Instead, these loans can be secured through private lenders such as banks and even the home builders themselves.

At NHC, when you partner with us for your mortgage, we’ll help make the financing process as easy as possible. On top of our low prices for homes, NHC Mortgage can help you secure affordable conventional mortgages to help you achieve the American Dream. Be sure to check out our mortgage calculator to get a better idea of what your mortgage could look like.

Government-Insured Loans

The second type of home loan you could secure is backed by the federal government. There are a few different mortgage loans you could qualify for in this category, starting with the FHA loan. FHA loans have become a very popular option among homebuyers for a simple reason: credit score requirements. With FHA loans, you don’t need to have a picture-perfect credit score to qualify. While a better score could help you lower your interest, FHA loans are available to any borrower who has at least a 620. On top of this, you could qualify for an FHA loan with a down payment as small as 3.5%.

Another government-insured real estate loan type is a VA loan. A VA home loan is a mortgage offered to veterans, active-duty service members, and some military spouses, backed by the U.S. Department of Veterans Affairs (VA). It helps eligible individuals buy, build, or refinance their homes. Compared to conventional loans—and even FHA loans—VA loans have a serious benefit for those who can qualify: no down payments are required. That’s right. With a VA loan, you could also skip the down payment. Coupled with NHC’s unbeatable prices for newly constructed homes, this could save you tens of thousands of dollars up front!

The third government-insured type of home loan is a USDA loan. These real estate loan types are reserved for those who are buying homes in rural or agricultural areas. USDA loans typically come with competitive interest rates, and like VA loans, they do not require a down payment. In fact, many of our affordable NHC communities are eligible for USDA loans. At our Waterside at Cedar Creek community, for example, we pay all closing costs and realtor commissions to keep more money in your pocket. Contact us to learn more about how you could get more space for less.

Non-Conventional Loans and Grants

Finally, you could also look into non-conventional loans or grants to finance your new home. In addition to the government-backed types of home loans, there are several other choices for homebuyers to consider. These loans are designed to help certain groups, like first-time homebuyers, low- to moderate-income buyers, and those in rural areas get easier access to the financing they deserve. Examples of non-conventional loan options include Fannie May or Freddie Mac first-time buyer grants, the Good Neighbor Next Door program, and even financial assistance from friends and family members.

No matter the type of type of home loan you’re looking for, NHC can help you simplify the process. Check out our mortgage checklist to ensure you have everything prepared to get the best rate possible.

Loan Terminology 101

Now that we’ve covered the types of home loans you could qualify for when buying your home, let’s briefly discuss some of the key mortgage terms you should know before applying. Developing your knowledge of these terms could go a long way in helping you secure the right financing for your home. It all starts with understanding how your rates will be paid over time.

• Fixed-Rate Mortgage: A type of home loan with an interest rate that stays the same throughout the entire term of the loan, ensuring consistent monthly payments. For example, if you agreed to a 4.5% interest rate, this would stay the same for every payment you make.
• Adjustable-Rate Mortgage: A type of home loan with an interest rate that can change periodically based on market conditions. This means that if your loan starts at a 6% interest rate, for example, it will either rise or fall over time, depending on the market.
• Down Payment: Once you’ve decided on the type of home loan, this is the upfront cash payment you make toward the purchase of a home, usually expressed as a percentage of the purchase price. Conventional loans often require 5%–20%.
• Principal: This refers to the original loan amount you borrowed from the lender, not including interest. Say you put $25,000 on a $250,000 home. Your principal amount before interest would be $225,000. Each mortgage payment you make gradually reduces this balance until you fully own the home.
• Interest: Following up on the principal, interest is simply the cost of borrowing money, charged by the lender as a percentage of the loan. It’s added to your monthly mortgage payment along with the principal.
• Private Mortgage Insurance (PMI): You’ll likely need PMI if your down payment is less than 20%. This is a monthly payment that protects lenders in case of default. With NHC’s lowest prices per square foot, however, you may find your ability to put down 20% is greater than you think!
• Escrow: An account where part of your monthly mortgage payment goes to cover property taxes and homeowner’s insurance, ensuring these bills are paid on time.
• Amortization: The process of gradually paying off a mortgage through scheduled, periodic payments of both principal and interest over the loan term.
• Refinancing: The process of paying off one loan with the proceeds from a new loan using the same property as security. This helps you take advantage of lower interest rates.
• Closing Costs: Fees and expenses, such as appraisal, title insurance, and attorney fees, that buyers and sellers incur during the transaction. They typically range from 2% to 5% of the home’s purchase price.

Understanding Closing Costs: Is There a Way to Lower Them?

One of the biggest steps of buying a home—apart from deciding which type of home loan to apply for—is paying closing costs. For some buyers, these extra fees come as a surprise, as they can raise the total cost of closing by thousands. While the buyer typically pays closing costs in full, there are ways to lower these costs or even cancel them out entirely in some cases. The first tip is to seek concessions from the seller of the home, especially if it is a buyer’s market. While negotiating the final price of the home, see if the seller would be willing to cover any of the closing costs to sweeten the deal.

On top of this, you could also work out a deal with the homebuilder if you’re buying a newly constructed space. At NHC, we help our customers cover their closing costs. At some communities, we may even pay the closing costs in full to make it that much more worth it for you and your family. And when you finance with NHC Mortgage, your new home deposit will be ONLY $95. Our homes won’t last forever, though, so be sure to find yours while you can!

NHC: Putting Affordable Homes Back on the Map

Although many of the news headlines you see today might reference the struggles home buyers could face with prices or the different types of home loans, we’re on a mission to change that. At NHC, we believe that every home buyer deserves to get more space for less money. That’s why you won’t find $500,000+ price tags for tiny homes when you shop our available listings. The time is now to secure your slice of the American Dream. If you’d like to receive more information about our houses and how you can finance with NHC Mortgage, do not hesitate to reach out to our team.

FAQs

What is the best type of home loan to get?
If you have a higher credit score and are able to put down at least 5-10%, a conventional loan may be your best choice. However, there are plenty of other home financing options available!

What type of home loan is used to buy real estate?
The most common type of real estate loans are mortgages.

Is FHA better than conventional?
If you’re looking for a more flexible type of home loan, FHA could be better than conventional, as the credit score and down payment requirements may not be as strict.

Which type of mortgage has the lowest interest rate?
The type of home loan with the lowest interest rate will likely depend on your down payment. Adjustable-rate mortgages may have the lowest interest rates to begin with, but these costs could go up over time depending on how the market plays out.