When you start researching how to buy a home, the sheer number of mortgage options can feel overwhelming. We are here to break them down in one convenient place so you can clearly understand what these products offer and who they are designed for.
While this guide is an excellent starting point, every financial situation is unique. For a complete picture and personalized advice, we recommend reaching out to a Southern Trust Mortgage Loan Officer to explore your best options.
The Foundational Loan Products
These are the mortgage options that most traditional homebuyers are familiar with and frequently qualify for.
1.Conventional Loans
Backed by Fannie Mae and Freddie Mac, conventional loans are the most common choice for buyers with established credit.
The Benefits: Low down payment options starting at just 3%. Plus, if you put 20% down or more, you can avoid paying monthly private mortgage insurance (PMI). Buyers can choose between fixed-rate and adjustable-rate mortgages (ARMs) while benefiting from competitive interest rates.
Who it’s for: Conventional loans are an excellent fit for buyers with solid credit scores and a stable down payment saved up.
2.FHA Loans
Insured by the Federal Housing Administration, FHA Loans are designed to make homeownership more accessible.
The Benefits: Down payments start as low as 3.5% with flexible credit score requirements. FHA guidelines also allow for down payment assistance programs and financial gift funds from family.
Who it’s for: FHA Loans are a popular choice for first-time homebuyers or anyone working to rebuild their credit.
3.VA Loans
Guaranteed by the U.S. Department of Veterans Affairs, this program is our way of saying thank you to those who serve.
The Benefits: VA Loans feature a 0% down payment requirement, no monthly mortgage insurance premiums, flexible credit guidelines, and some of the most competitive interest rates on the market.
Who it’s for: Veterans, active-duty service members, and eligible surviving spouses.
4.USDA Loans:
Backed by the U.S. Department of Agriculture, this program promotes homeownership in rural and developing communities.
The Benefits: Offers a 0% down payment option, competitive interest rates, flexible credit requirements, and low upfront and monthly fees.
Who it’s for: Buyers looking to purchase a home in designated rural and suburban areas that meet the area’s median income limits.
5.Jumbo Loans (Non-Conforming)
A Jumbo loan is designed for when your dream home requires a loan amount that exceeds standard financing boundaries.
The Benefits: Allows you to borrow beyond the standard baseline conforming loan limit set by the Federal Housing Financing Agency (FHFA), which currently stands at $832,750 for a single-family home. This allows you to secure high-value properties or luxury homes without needing multiple mortgages.
Who it’s for: Buyers looking to purchase higher-end real estate who possess strong credit profiles, low debt-to-income ratios, and a larger down payment.
Foundational Loan Products Comparison Chart
| Loan Product | Minimum Down Payment | Credit Profile | Standout Benefit |
|---|---|---|---|
| Conventional | As little as 3% | Good to Excellent | Cancel monthly mortgage insurance (PMI) at 20% equity. |
| FHA | As little as 3.5% | Flexible / Rebuilding | Flexible credit and DTI requirements; allows 100% gift funds. |
| VA | 0% Down Payment | Flexible for Veterans | No monthly mortgage insurance premiums and competitive rates. |
| USDA | 0% Down Payment | Moderate / Flexible | 100% financing for designated rural and suburban areas. |
| Jumbo | Varies (Typically 10-20%) | Strong / Established | Finance high-value or luxury homes above conforming limits. |
Niche Mortgage Products
These specialized loan options are tailored for buyers with unique financial situations or those looking to expand their real estate portfolio.
Bank Statement Loans
How it works: Designed specifically for self-employed borrowers who might not qualify under traditional guidelines. This program uses verified bank statements rather than tax returns to analyze the actual cash flow of your business.
Who it’s for: Business owners, entrepreneurs, and independent operators.
1099 Loan
How it works: Similar to bank statement programs, this allows independent workforce members to qualify using their 1099 earing statements from the last 1-2 years instead of traditional tax filings.
Who it’s for: Freelancers, independent contractors, and gig-economy workers.
DSCR (Debt Service Coverage Ratio) Loans
How it works: A DSCR is a specialized mortgage used for purchasing long-term or short-term investment properties. Instead of looking at your personal income or employment history, qualification is based entirely on the property’s expected rental income and cashflow potential.
Who it’s for: Real estate investors looking to scale their portfolios without personal income friction.
Buy Before You Sell Programs
Moving into your next home while owning your current one often creates a stressful logistical puzzle. Many buyers face the hurdle of qualifying for two mortgages simultaneously or being forced to make their new home purchase contingent on selling their existing property first.
To bridge this gap and ensure a seamless transition, we offer specialized programs to help you secure your next home before selling your current one.
Equity Boost*: Unlock up to 90% Combined Loan-to-Value CLTV) on your current home using proof of assets, a Home Equity Line or Credit (HELOC) on your primary residence, or a combination of both to fund the down payment on your next purchase.
DTI Drop*: Eliminate the need to sell before you buy. By temporarily omitting your current mortgage payment form your debt-to-income (DTI) ratio, this program increases your purchasing power so you can submit strong, non-contingent offers.
If you want to move but are worried about the timing, these strategies provide the perfect safety net. To learn more about these programs and to see if you qualify, please contact us today!
*Additional requirements apply. Consult your loan officer to learn more.
Let Us Make Home Happen for You
Whether you are taking your very first step toward homeownership or looking to expand your real estate portfolio with investment properties, Southern Trust Mortgage offers a variety of programs to make your dreams a reality. Contact us today to get started!
FAQ: Frequently Asked Questions About Loan Products
What is the difference between a Conventional and an FHA Loan?
The biggest difference is government backing. Conventional loans are not insured by the federal government and typically require higher credit scores while offering a path to remove mortgage insurance. FHA loans are government-backed, offering lower credit score requirements, but require mortgage insurance regardless of down payment size.
Can I buy a home if I am self-employed or a freelancer?
Yes. While traditional mortgages require standard W-2 tax documents, niche products like Bank Statement Loans and 1099 Loans allow entrepreneurs, independent contractors, and gig workers to qualify using alternative proofs of cash flow.
What is a Jumbo loan, and when do I need one?
You will need a Jumbo loan if the amount of money you need to borrow exceeds the conforming loan limits set by FHFA. For most areas, a single-family home loan amount over $832,750 requires a Jumbo loan. Since these loans cannot be purchased by Fannie Mae or Freddie Mac, they carry stricter qualification criteria, including higher credit scores and larger reserve assets.
