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A real estate loan is the most common way people finance the purchase of a home, often called a mortgage. The loan uses the property as collateral, which means if you default on the loan, the ownership of the house or property goes back to the lender.
There are three main types of residential real estate loans: conventional, government-backed, and no-documentation (no-doc) loans. These loans differ in terms of required credit scores, down payment amounts, interest rates, private mortgage insurance, and the length of the loan term.
Conventional real estate loans come as either fixed-rate loans or adjustable-rate loans.
A fixed-rate loan has an interest rate that stays the same for the entire term of the mortgage. For example, if you take out a loan at 10% interest, you will pay 10% for the full duration of the loan.
An adjustable-rate mortgage (ARM) has an interest rate that is fixed for an initial period, usually two years, and then adjusts over time. The rate may increase or decrease depending on an index, such as LIBOR, so changes are not arbitrary.
ARMs often start with a lower interest rate, which can be beneficial if you plan to pay off the loan early or refinance later. However, keep in mind that the rate can change after the fixed period, which means your monthly payment may increase. ARMs usually adjust annually, but some lenders may adjust every six months or quarterly, so always check the loan terms carefully.
Neither fixed-rate nor adjustable-rate loans are strictly better than the other. Studies show that borrowers often pay less over time with an adjustable-rate mortgage (ARM). However, an ARM is not ideal for everyone.
If interest rates are rising and lenders are more selective, a fixed-rate loan may be safer, as it protects you from future increases. Conversely, if interest rates are falling, an ARM can save you money over time. ARMs are also a good choice if you don’t plan to live in the home for many years.
Be careful when choosing, because refinancing is possible but can be costly and depends on your home equity. A popular option is the 5/1 ARM, which keeps a fixed rate for the first five years, then adjusts annually. This can be ideal if you plan to sell within a few years. Keep in mind that longer-term ARMs carry higher risk, as rates could rise above fixed-rate levels.
To determine which loan is right for you, compare the rates and calculate your potential mortgage payments. Your monthly payment could vary significantly depending on the loan type and interest rate.
An FHA loan is backed by the federal government. It’s a good option for anyone with less-than-perfect credit, damaged credit, or little to no credit history. While conventional loans usually require a credit score of 620 or higher, FHA loans can be approved with a score of 580. Keep in mind that some lenders may require a higher minimum, like 600.
FHA loans don’t need a 20% down payment. You can put down as little as 3.5%, and the interest rates are competitive—sometimes even lower than conventional loans.
Although often thought of as a program for first-time homebuyers, FHA loans are available to anyone, even if you’ve purchased a home before. They are ideal for those with low savings or damaged credit.
One drawback is PMI (private mortgage insurance). If your down payment is less than 20%, you’ll pay a monthly PMI fee for the life of the loan. While it may only add about $100 to your payment, it doesn’t go away once you reach 20% equity. This is something buyers with good credit might consider before choosing an FHA loan over a conventional loan.
When applying for an FHA loan, your lender will likely ask for several documents. These may include:
Federal tax returns from the last 2–3 years
W-2s or 1099s from the previous 2 years
Pay stubs from the last few months
Bank statements from the past few months
Statements from 401(k), money market, stocks, or similar accounts
Contact info for your landlord and/or one year of canceled checks showing your payment history
Property tax receipts
Divorce decree or other legal documents showing eligibility to buy or refinance the home
Recent utility bills or credit card statements
You’ll also need to provide proof of identity, such as a driver’s license, Social Security card, or green card.
For many FHA home loans, applicants need a minimum FICO score of 580. Some borrowers with scores between 500 and 579 may still qualify, but they might have to complete extra steps during the application process.
Keep in mind that individual lenders can set their own requirements. If you’re repairing your credit, let your lender know—some lenders specialize in helping applicants rebuild their credit.
FHA loan limits depend on the area where you live. Maximum loan amounts typically range from $331,760 to $765,600, depending on your location.
Funding for an FHA loan typically takes 30 to 60 days. This timeframe includes the entire process, from the initial application to the final closing paperwork.
FHA home loans must be repaid in 30 years or less. There are two types of mortgage insurance payments that may be included in your loan:
Upfront Mortgage Insurance Premium (UFMIP) – a one-time payment added to your loan.
Annual Mortgage Insurance Premium (MIP) – paid yearly. You must pay the Annual MIP for at least 11 years, though some borrowers pay it for the full duration of their loan.
A VA home loan is a benefit for U.S. military veterans, whether active duty or honorably discharged. It’s guaranteed by the Veterans Administration (VA) and available to all branches of the military.
Key Features:
No minimum credit score requirement – though banks may set their own internal standards. If your credit is low, shop around for the lender with the most flexible requirements.
Zero down payment option – making it easier to buy a home without saving a large sum upfront. Some borrowers may choose to put down 5%, which can reduce VA fees.
Low interest rates – VA loans often offer some of the lowest rates among real estate loans. Rates vary by lender, so compare offers.
Property requirements – The VA ensures homes are safe and in good condition. Homes must meet strict standards to protect veterans and their families.
VA loans usually require fewer documents than FHA loans. When applying for a VA loan, you should be ready to provide:
Proof of income – from employment, self-employment, or other sources
Tax returns – typically from the last 2 years
Pay stubs – recent copies
Divorce decree or child custody decree – if applicable
Driver’s license
Social Security card
You may also be asked for:
Proof of debts – like credit cards or loans
Payment history – for rent, utilities, or other obligations
With a VA loan, you can borrow a substantial amount of money. Maximum loan amounts vary depending on your county, ranging from $510,400 to $765,600. Your specific borrowing limit will depend on local county limits and the value of the home you plan to purchase.
If conventional or government-backed home loans don’t fit your circumstances, you may qualify for no-doc, low-doc, or stated income programs. These loans offer more flexibility for borrowers who cannot provide standard proof of income.
Traditional loans typically require both pay stubs and tax returns, which may not work for everyone. Borrowers with fluctuating income, seasonal earnings, or cash-heavy businesses (like tips) may benefit from these flexible loan options.
No-doc loans require little to no paperwork to verify income.
Low-doc loans ask for minimal documentation.
Stated income loans let you declare your income without full verification.
Important Note: These loans usually carry higher interest rates, often 3%–4% higher than conventional loans, to compensate lenders for increased risk. For self-employed borrowers, paying a higher monthly mortgage now can be a manageable option, with the possibility to refinance later when finances stabilize.
| Funding Type | Purpose | Amount | Disbursement | Payment Schedule |
|---|---|---|---|---|
| Traditional bank loan | General business | $150,000+ | Two to four months after approval | Monthly |
| SBA loan | General business use | Up to $5 million | Three to six months after approval | Monthly |
| Merchant cash advance | Payroll and other essential | Up to $500,000 | One week or less | A fixed percentage from daily sales; typically 3 to 12 months |
| Factoring | Operating expenses | 70% to 90% of invoices | One to two weeks | 2% to 3% of invoice totals; typically 30 days |
WelendLoans provides a variety of products offering the best options for our clients, with payment options as follows:
Daily payment
Weekly payment
Biweekly payment
Monthly payment
Depending on the financing product and partner you are paired with, we estimate it can take 24–72 hours to receive capital from the time we receive your initial required documentation.