The Complete Guide to Purchase Loans

Buying a home is one of the most exciting milestones in life—and choosing the right mortgage is the foundation of that journey. Whether you're a first-time buyer or upgrading to your forever home, understanding your loan options helps you make confident decisions and potentially save thousands over the life of your mortgage.

What Is a Purchase Loan?

A purchase loan is simply a mortgage used to buy a home. Unlike refinancing (where you replace an existing mortgage), a purchase loan is your original financing to acquire the property. The lender provides the funds, you buy the home, and then you pay back the loan over time—typically 15 or 30 years.

Types of Purchase Loans

Conventional Loans

These are the most common type of mortgage. They're not backed by the government and typically require a credit score of 620+ and a down payment of at least 3-5%. If you put down less than 20%, you'll pay Private Mortgage Insurance (PMI) until you reach that equity threshold.

FHA Loans

Backed by the Federal Housing Administration, FHA loans are perfect for first-time buyers or those with less-than-perfect credit. You can qualify with a credit score as low as 580 with just 3.5% down.

VA Loans

For veterans and active military, VA loans offer incredible benefits: zero down payment, no PMI, and competitive interest rates. If you've served our country, this is often the best option available.

USDA Loans

Buying in a rural area? USDA loans offer zero down payment for eligible properties and buyers who meet income requirements.

How Much Home Can You Afford?

Lenders look at your Debt-to-Income ratio (DTI) to determine how much you can borrow. Generally, your total monthly debts (including your new mortgage) shouldn't exceed 43% of your gross monthly income. But the number on paper isn't everything—you also want to feel comfortable with your payment.

The Purchase Loan Process

1. Pre-Approval: Get pre-approved before house hunting. This shows sellers you're serious and tells you exactly what you can afford.
2. Find Your Home: Work with a real estate agent to find properties in your budget.
3. Make an Offer: Once accepted, your pre-approval converts to a full loan application.
4. Underwriting: The lender verifies your income, assets, and the property value.
5. Closing: Sign the paperwork, get your keys, and celebrate!

What You'll Need to Apply

• Recent pay stubs (last 30 days)
• W-2s from the past 2 years
• Bank statements (last 2-3 months)
• Tax returns (if self-employed)
• Photo ID

Have questions? Don't hesitate to reach out. I'm here to help you navigate the home buying process with confidence. Call me at (847) 863-2022 or email bduran@newnhm.com.