Home Loan Options, Explained: Finding the Right Fit

Whether you're buying, refinancing or tapping your home's equity, there are more loan types than most people realize. Here's a plain-English overview.

Low-down-payment loans

Some loan types allow smaller down payments and more flexible credit requirements than a standard conventional loan. They often include mortgage insurance, so compare the total cost, not just the down payment.

Rate-and-term refinance

You replace your current loan with a new one, usually to get a lower rate or change the length of the loan. It's worth a look when available rates are meaningfully below yours. Compare closing costs with the monthly savings to find your break-even point.

Cash-out refinance

You replace your loan with a larger one and take the difference as cash, often for renovations or paying off higher-interest debt. Your home secures the loan, so borrow carefully.

How to compare offers

• APR, not just the interest rate. It includes many fees.
• Closing costs, itemized in writing.
• Monthly payment and total interest over the life of the loan.
• Rate lock: how long it lasts, and what it costs.

See where you stand

The quickest way to get a feel for your options is to compare the loan options you may qualify for. Rates and approval depend on your credit, income and property, and aren't guaranteed. Get more than one quote before you decide.

One tip: reputable lenders explain every cost in writing and give you time to decide. Take your time and compare.

Loan options later in life

Many retirees are surprised to learn they can still refinance or take out a new home loan. Lenders look at your income sources, which can include retirement benefits, pensions, retirement account withdrawals and investment income, along with your credit and your home's value. Lenders are not allowed to deny you simply because of your age.

Refinancing on a fixed income

If you still have a mortgage, lowering your rate or payment can free up room in a fixed budget. Some retirees also choose a shorter loan term so the home is paid off sooner. Others take cash out for home repairs or to pay off higher-interest credit cards.

Have your paperwork ready

• Your latest benefit statements and pension letters.
• Recent bank and retirement account statements.
• Your most recent tax returns.
• Your homeowners insurance and property tax information.

Having these ready makes comparing offers faster and less stressful.