What Is A Home Loan?
A home loan, also called a mortgage, is when you are borrowing money to buy residential property. This loan will be secured against the property meaning if you fail to repay the loan, the lender can take possession of your home. You will pay back the money you have borrowed in monthly instalments over a fixed period of time. Your repayments will include interest and a portion of the capital repayment. They may also include property tax and homeowner’s insurance.
Quick Facts
| Question | Answer |
|---|---|
| What is a home loan? | A mortgage that finances the purchase of a residential property |
| Common loan types | Conventional, FHA, VA, jumbo, non-QM, renovation |
| Typical terms | 15 and 30 years, fixed or adjustable rates |
| Lowest down payment | 0% on VA loans for eligible borrowers; 3% to 3.5% on many FHA and conventional loans |
| Typical buyer closing costs | Often 2% to 5% of the purchase price |
| Typical time to close | Roughly 30 to 60 days after the contract is signed |
| Where can we help? | NJ, NY, FL, PA, IN, CA and TX |
| Free quote | 516-327-6000 · sunnyjain@amcaps.com |
Types Of Home Loan
There are many different types of home loans including conventional, FHA, VA, jumbo and non-QM. There are also renovation and investment schemes. Each type will have different criteria for deposits, credit scores and documentation.
| Loan type | Who it fits | Key feature |
|---|---|---|
| Conventional | Borrowers with solid credit | As little as 3% down; private mortgage insurance applies if you put down less than 20% |
| FHA | First-time buyers and borrowers with lower credit | 3.5% down with a 580 score; FHA Advantage Program lists scores as low as 550 |
| VA | Eligible veterans and service members | Often no down payment and no monthly mortgage insurance |
| Jumbo | Higher-priced homes above conforming limits | Up to 85% LTV |
| Non-QM | Self-employed, investors, foreign nationals | Bank statement, 1099, P&L, DSCR, foreign national and ITIN programs |
| Renovation | Buyers of homes that need work | FHA 203(k) and Homestyle Renovation loans roll repairs into one loan |
| Investment | Landlords and second-home buyers | Conventional investment and DSCR programs |
| Delayed financing | Buyers who paid cash | Lets you recover cash with a mortgage soon after purchase |
Which Home Loan Is Right for Me?
The right loan depends on your down payment, credit, income type and property. This table shows where we usually start.
| If your situation is | We usually look at first |
|---|---|
| Small down payment, average credit | FHA or conventional with 3% down |
| Veteran or service member | VA loan |
| Strong credit and 20% down | Conventional |
| Buying above the conforming limit | Jumbo |
| Self-employed with strong deposits | Bank statement or P&L program |
| Buying a rental | Investor DSCR or conventional investment |
| Buying a fixer-upper | FHA 203(k) or Homestyle Renovation |
| No U.S. credit history | Foreign National or ITIN program |
Not sure? Start with a mortgage pre approval, which shows which programs you qualify for.
How Much Down Payment Do You Need for a Home Loan?
This will vary depending on the type of loan. FHA loans can be obtained with a 3.5% deposit and a 580 credit score. Conventional loans can be obtained with as little as a 3% deposit. VA loans often have no deposit required. Jumbo loans can be obtained with as little as 15% deposit (85% LTV). Investment properties will usually require more of a deposit.
With conventional loans, you will not have to pay PMI if you put down a 20% deposit. If you put down less than this, you will have to pay mortgage insurance which will increase your monthly payments until you have built up enough equity.
What Credit Score Do You Need?
Conventional loans often require a credit score of 620+. FHA loans can be obtained with a 3.5% deposit and a credit score of 580. Our FHA Advantage Program can be obtained with a credit score of 550+. The better your credit score the better the rate you will receive and less mortgage insurance.
However, lenders also take into consideration your income, debts and savings to determine how much you can borrow.
How Much Can I Afford?
Lenders will look at your debt to income ratio. This compares your monthly debt (including your new mortgage) to your gross monthly income. Many lenders will look for a ratio of 43%-45% or below. Some schemes will allow a higher ratio. Your deposit, property tax, insurance and HOA/co-op fees will also affect this.
Use our mortgage calculator to get an indication. You can also apply for a pre-approval to see how much you can actually qualify for.
Fixed Rate Or Variable Rate Home Loan?
A fixed rate mortgage means that you will have the same rate throughout the term of your loan. This means that your capital and interest payments will remain the same. A variable rate mortgage will start off as a fixed rate for a certain period of time and then fluctuate. If you plan to stay in your home for a long period of time then a fixed rate mortgage would be ideal to give you certainty. If you are planning to move or refinance then a variable rate may be suitable.
The length of your mortgage will also affect how much you pay. A 15 year mortgage will have higher monthly payments but much less interest. A 30 year mortgage will have lower monthly payments but more interest.
How Much Does A Home Loan Cost?
In addition to your deposit you will usually pay around 2%-5% in closing costs. This includes lender and processing fees, valuation, title insurance, settlement fees, upfront property tax and insurance and state taxes.
| State | What to know |
|---|---|
| New Jersey | Attorney and title fees apply, with no mortgage recording tax. |
| New York | Mortgage recording tax applies to most financed purchases, and purchases of $1 million or more can trigger the mansion tax. |
| Florida | Documentary stamp tax and intangible tax apply to the loan, and insurance costs matter. |
Your Loan Estimate lists every cost in writing before you commit.
How To Get A Home Loan?
To get a Home Loan you will need to get a pre-approval, find a property, select your loan scheme, complete a valuation and underwriting process and complete your closing. Most purchases will take around 30-60 days from signing the contract, this will depend on the state, lender and property.
- Pre-approval – We will look at your documents and match you to the right schemes.
- Find a property and sign a contract – Use your pre-approval to make a realistic offer.
- Choose your loan and lock in your rate – We will help you choose the right option and lock in your rate.
- Valuation and underwriting – The lender will value your property and check your file.
- Close – Sign your loan documents and get the keys.
What Documents Do You Need for a Home Loan?
Most applicants provide the following. Requirements vary by program and lender.
- Government-issued photo ID and Social Security number
- Pay stubs, W-2s and two years of tax returns
- Recent bank and asset statements
- The signed purchase contract
- If self-employed: business returns and a profit-and-loss statement, or 12 to 24 months of bank statements
- For VA loans: your Certificate of Eligibility
Can You Get a Home Loan If You’re Self-Employed, a Foreign National or an Investor?
Yes. These borrowers often don’t fit standard guidelines, so we offer programs designed for them.
- Self-employed: 12 and 24 month bank statement, 1099, P&L and one-year alternative documentation programs.
- Foreign nationals and ITIN borrowers: programs for buyers without a U.S. credit history or Social Security number.
- Investors: investor DSCR loans that qualify you on the property’s rental income, plus conventional investment loans.
- Asset-based borrowers: an asset qualifier program that uses your savings instead of income.
What Documents Do You Need for a Home Loan?
Most applicants provide the following. Requirements vary by program and lender.
- Government-issued photo ID and Social Security number
- Pay stubs, W-2s and two years of tax returns
- Recent bank and asset statements
- The signed purchase contract
- If self-employed: business returns and a profit-and-loss statement, or 12 to 24 months of bank statements
- For VA loans: your Certificate of Eligibility
Can You Get a Home Loan If You’re Self-Employed, a Foreign National or an Investor?
Yes. These borrowers often don’t fit standard guidelines, so we offer programs designed for them.
- Self-employed: 12 and 24 month bank statement, 1099, P&L and one-year alternative documentation programs.
- Foreign nationals and ITIN borrowers: programs for buyers without a U.S. credit history or Social Security number.
- Investors: investor DSCR loans that qualify you on the property’s rental income, plus conventional investment loans.
- Asset-based borrowers: an asset qualifier program that uses your savings instead of income.
Can You Get a Home Loan If You’re Self-Employed, a Foreign National or an Investor?
Yes. These borrowers often don’t fit standard guidelines, so we offer programs designed for them.
- Self-employed: 12 and 24 month bank statement, 1099, P&L and one-year alternative documentation programs.
- Foreign nationals and ITIN borrowers: programs for buyers without a U.S. credit history or Social Security number.
- Investors: investor DSCR loans that qualify you on the property’s rental income, plus conventional investment loans.
- Asset-based borrowers: an asset qualifier program that uses your savings instead of income.
Who Is American Capital Mortgage Inc.?
American Capital Mortgage Inc. is a mortgage broker and banker headquartered in Orange, New Jersey, licensed as a mortgage broker in Florida and several other states. Sunny Jain, our founder and CEO, has been in the mortgage business since 1996, with prior experience at Bank America Mortgage and Bank of NY. You can verify licensing for our loan officers at NMLS Consumer Access.
- Sunny Jain, CEO (NMLS ID 13710): residential and commercial originations, 30+ years of experience
- Rajiv Jain, Vice President (NMLS ID 16291): 20+ years in the mortgage business
- Joe St. Rose, Loan Officer (NMLS ID 1473569): multifamily and commercial mortgage origination
FAQs:
FHA loans are often the most flexible on credit and down payment, with 3.5% down at a 580 score. Eligibility still depends on your income, debts and the property, so a pre-approval shows what you qualify for.
VA loans often require no down payment for eligible veterans and service members. Many FHA and conventional programs require as little as 3% to 3.5%.
Mortgage insurance protects the lender if you put down less than 20% on a conventional loan, or on FHA loans. You can avoid private mortgage insurance on a conventional loan by putting down 20%, and VA loans have no monthly mortgage insurance.
A 15-year loan has a higher payment but much less total interest, while a 30-year loan has a lower payment and more total interest. Choose based on the payment you can comfortably afford.
Yes. We offer bank statement, 1099 and profit-and-loss programs for self-employed borrowers who don’t qualify with tax returns alone.
Often, yes. We offer ITIN and Foreign National programs for buyers without a U.S. credit history or Social Security number. Terms and down payments differ from standard loans.
Yes. FHA 203(k) and Homestyle Renovation loans let you finance both the purchase and the repairs in one loan.
A direct lender funds loans itself, while a broker compares loan programs from multiple lenders. Compare written Loan Estimates from each to see your real costs.
Ready to Find the Right Home Loan?
Get your free quote today Contact us or Call: 516-327-6000
Email: sunnyjain@amcaps.com
Address: 439 Main Street, Suite 102, Orange, NJ 07050