This is one of the most commonly asked mortgage questions. If you’ve paid off all your debt—and I recommend you do before buying a home—it is possible you won’t have a credit score when you meet with a lender. But don’t worry; you can still get a mortgage.

If you apply for a mortgage without a credit score, you’ll need to go through a process called manual underwriting. Manual underwriting simply means you’ll be asked to provide additional paperwork for the underwriter to review personally. 

I recommend putting at least 10% down on a home, but 20% is even better because you won’t have to pay private mortgage insurance (PMI). PMI is an extra cost added to your monthly payment that doesn’t go toward paying off your mortgage. It’s worth putting a big down payment and here’s why:

• • • • You’ll have built-in equity when you move into your home.
      • You can finance less, which means you’ll have a lower monthly payment.

On the flip side, if you buy a home with little to no down payment and the market dips, you could be stuck until home values recover.

With so many mortgage options out there, it can be hard to know how each would impact you in the long run. Here are the most common mortgage loan types:

A Fixed-Rate Mortgage (FRM) is a mortgage that does not change over the life of the loan. FRM has a fixed interest rate for the entire term of the loan.  Every month, as the principal balance gets smaller, less of the payment is needed to cover the previous month’s interest, and more is allocated toward the principal reduction. At the end of the loan’s term, the balance is extinguished and the mortgage is paid in full. 

The most common Fixed-Rate Mortgages are:      10-year    15-year     30-year  

An Adjustable-Rate Mortgage (ARM) is a type of mortgage in which the interest rate applied on the outstanding balance varies throughout the life of the loan. With an adjustable-rate mortgage, the initial interest rate is fixed for a period of time. After this initial period of time, the interest rate resets periodically, at yearly or even monthly intervals. An Adjustable-Rate Mortgage (ARM)is a type of mortgage in which the interest rate applied on the outstanding balance varies throughout the life of the loan.

The VA Loan is a $0 down mortgage option available to Veterans, Service Members and select military spouses. VA loans are issued by private lenders, such as a mortgage company or bank, and guaranteed by the U.S. Department of Veterans Affairs (VA).  VA Loans are among the last 0% down home loans available on the market today. The VA guaranty gives lenders a greater degree of safety and flexibility, which typically means a more competitive rate than non-VA loans.

USDA loans aren’t the right fit for every buyer, but for those first time and repeat buyers needing that extra help in achieving their homeownership goals it a great sound safe option.

Why you might want to consider a USDA Guaranteed Home Loan:

• • • • • No down payment requirement – and flexibility to finance closing costs in many cases
        • No additional Down Payment Assistance (DPA) loans needed which have extra payments in the future
        • More lenient credit terms than conventional financing options