The Internet’s 20 Most Common Mortgage Questions: Installment 1 (Q1-Q20)

This is installment 1 of answers to the Internet’s 20 most asked Mortgage questions.

By Clay Edmonds | MortgageSimplified.net

Introduction: Mortgage Programs can sound like alphabet Soup

Most people hear mortgage terms — FHA, VA, DSCR, bank statement loans, jumbo loans, 30-year fixed, ARMs—and are confused without more in-depth explanation.

There is no one-size-fits-all mortgage.

There is only the mortgage that fits your financial fingerprint — your income, credit, assets, goals, property type, and time horizon. After four decades in real estate finance, here is what I have learned:

The loan you choose can either save you tens of thousands of dollars… or cost you tens of thousands.

This guide breaks down most major types of mortgages available today, from traditional to non-qualifying (Non-QM) to investor-focused to retirement-oriented options.

It is one of the most concise and comprehensive overviews you will find online — written in plain English, with real explanations, not sales pitches.

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PART 1: TRADITIONAL MORTGAGE PROGRAMS

There are two primary types of residential loans you are most likely to encounter: fixed-rate and variable (adjustable rate – ARM) mortgages.

A. Fixed-Rate Mortgages (The “Set It and Forget It” Loan)

A fixed-rate mortgage keeps the same interest rate for the entire loan term (15, 20, or 30 years). It provides a consistent payment of principal and interest for the entire term of the loan, and is also referred to as a fully amortizing loan.

• Best For: Long-term homeowners, Investors seeking long-term payment stability.
• Key Strengths: Predictable monthly principal + interest, No surprises due to rate changes, Works well in rising-rate environments.

Important Reality: “Fixed Rate” Does Not Mean “Fixed Payment”

This is one of the biggest misunderstandings in mortgage finance. A fixed-rate loan only fixes your principal and interest portion. Your total monthly payment also includes property taxes, homeowners’ insurance, flood insurance, and HOA or condo fees (if applicable). Those almost always increase over time. Your escrow portion is not fixed. Understanding this upfront prevents surprises later.

B. Adjustable-Rate Mortgages (ARMs)

Most people believe ARMs always start with lower interest rates. Usually true — but not always. There are market cycles where ARMs have the same rate as fixed, are more expensive than fixed, or offer no benefit whatsoever (as seen 2022–2024).

• Best For: Short-term owners, Borrowers planning to refinance, Situations where ARM pricing is significantly lower.
• Not Ideal For: Long-term ownership, High market volatility, Situations where ARM rates equal or exceed fixed.

ARMs are tools — powerful when used properly, pointless when misapplied.

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PART 2: TRADITIONAL MORTGAGE SOURCES

A. FHA Loans (Flexible, Forgiving, Extra Buying Power)

FHA loans are government-insured and often the most flexible program available.

• Key Strengths: Down payments as low as 3.5%, More forgiving credit requirements (as low as 580 for 3.5% down), Higher allowable Debt To Income ratios (often up to $\approx$ 57%).
• Best For: Buyers rebuilding credit, Families needing maximum buying power, High-debt households.
• Note: FHA requires an Upfront Mortgage Insurance Premium (UFMIP) and a Monthly MIP, which often lasts for the life of the loan.

B. Conventional Loans (The Standard for Strong Financial Profiles)

Conventional loans follow Fannie Mae and Freddie Mac guidelines.

• Key Strengths: Down payments from 3% to 20%+, PMI can be removed once 20% equity is reached, Broad property eligibility (primary, second home, or investment property).
• Best For: Good-to-excellent credit (typically 620+ for minimum qualification), Buyers wanting PMI flexibility.
• Note: Conventional loans are generally preferred for their versatility and removal of mortgage insurance.

C. VA Loans (The Best Loan in America for Those Who Qualify)

VA loans are unmatched for eligible veterans and service members—a benefit earned.

• Key Strengths: Zero down payment, No monthly mortgage insurance (a huge benefit), Typically the lowest interest rates, and Flexible underwriting.
• Best For: Veterans, Active-duty military, Certain surviving spouses.
• Note: The VA program can be used for luxury and higher-priced property as well. (Make sure and talk to a mortgage broker professional who has VA experience to determine if you qualify.)

D. USDA Loans (Zero Down for Eligible Locations)

A USDA loan provides 100% financing in qualifying rural and suburban zones.

• Key Strengths: Zero down, Low insurance costs, Flexible credit.
• Best For: Buyers in USDA-eligible zones, First-time or budget-conscious buyers.

E. Jumbo Loans

A jumbo loan applies when the loan exceeds conforming limits ($\$766,550$ in 2024 for most counties).

• Key Strengths: High loan amounts, Competitive rates for strong borrowers, and Required reserves offer financial security.
• Best For: Higher-income buyers, Luxury markets, Strong-credit borrowers, or high-wealth individuals.

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PART 3: NON-QM & ALTERNATIVE DOCUMENTATION LOANS

When Traditional Financing Doesn’t Fit — These Programs Step In

Non-QM (Non-Qualified Mortgage) loans are the modern lending universe built for borrowers who fall outside the conventional “agency box.” These loans do not require meeting the strict income-verification standards of Fannie Mae, Freddie Mac, FHA, or VA. They exist because millions of financially strong borrowers don’t show income the way the agencies want, but they can absolutely repay a mortgage.

1. DSCR Loans — The Investor Workhorse

DSCR = Debt Service Coverage Ratio. The loan decision is based entirely on the property’s ability to pay for itself.

• How it works: The lender compares the market rent (provided by the appraiser) to the proposed mortgage payment. If rent $\ge$ payment (a DSCR of 1.0 or higher), investors can qualify without personal income documentation.
• Why Investors Love It: No tax returns, no W-2s, Works for long-term rentals, short-term rentals (Airbnb), or mixed-use residential investment. You can scale a portfolio quickly because qualification is property-based.

2. 30-Year Fixed Non-QM Investor Loans

A full, traditional 30-year fixed-rate loan—but without requiring conventional tax-return or pay stub documentation. These programs use bank statements, cash-flow analysis, or other alternative documentation to qualify the loan.

3. No-Ratio Investor Loans

These loans ignore DTI completely. Underwriters focus on property value, equity, down payment, marketability, and credit profile instead.

4. Bank Statement Loans

The gold standard for self-employed borrowers.

• How income is calculated: Lender reviews 12 or 24 months of business or personal bank statements and determines actual cash flow.
• Who benefits: Business owners, independent contractors, Realtors, and high earners who write off heavy expenses, resulting in low taxable income. This loan provides greater flexibility compared to conventional loans for these borrowers.

5. Asset Depletion / Asset-Based Income Loans

Borrowers qualify by converting assets (checking, savings, brokerage, retirement accounts) into an “income stream.” Typically, the near liquid asset value is divided by 62 to 85 months to come up with a monthly income amount to calculate a debt-to-income ratio (DTI).

• Best For: Retirees, High-net-worth individuals, People living off investments, Borrowers who recently sold a business or property.

Other Key Non-QM / Alternative Documentation Types

• Fix-and-Flip / Rehab / BRRRR Loans: Short-term, interest-only loans based on ARV (After-Repair Value). Your value lies in comparing private investor hard money vs. true non-QM renovation loans (which often have lower rates and better leverage).
• 1099-Only Loans: Income based on 1 or 2 years of 1099s, without requiring tax returns. Ideal for consultants, freelancers, and commission-based professionals.
• ITIN Loans: For borrowers who file taxes with an Individual Taxpayer Identification Number instead of a Social Security number.
• Foreign National Loans: Designed for non-U.S. residents purchasing American real estate; often requires higher down payments and verification of international assets.

Summary: Your Mortgage Strategy

We’ve just broken down the core mortgage landscape, from the predictable stability of a fixed rate to the complex flexibility of the Non-QM world. The key takeaway is this:

The best mortgage isn’t the cheapest one; it’s the one that perfectly fits your specific financial fingerprint.

For traditional W-2 borrowers with strong credit, a Conventional or VA loan often provides the best long-term value and most payment flexibility. However, for the self-employed entrepreneur, the real estate investor, or the high-net-worth individual, the freedom and sophistication of a Non-QM product (like DSCR or Bank Statement Loans) can be the single greatest tool for building wealth while navigating complex tax scenarios.

Your job as a borrower is not to memorize all 13 of these programs. Your job is to partner with an advisor who already has the four decades of underwriting experience to select the right tool for the right job and structure your loan cleanly from the start.

Don’t wait until you find a property to get your strategy right. If you’re ready to move forward with a clear, confident plan, or if you need to know which of these 13 options fits your financial fingerprint, contact me through MortgageSimplified.net today.

We structure sustainable homeownership.