Which Mortgage is Right for You: A Guide for Homebuyers in New England

When you're looking to buy a home in New England, especially in the scenic Lakes Region of New Hampshire, choosing the right mortgage is a critical step in your journey. Homebuyers in 2023 have several types of mortgages available to them. Not sure which is right for you? Let’s explore the options most relevant to you.

Conventional mortgages in New Hampshire

Conventional mortgages are the most common type of mortgage, and they're particularly prevalent in the New England area. New Hampshire homebuyers should note that many local lenders offer competitive rates.

To qualify for a conventional mortgage in New Hampshire, you typically need:

• Credit score of at least 620, though some lenders have higher requirements

• Debt-to-income ratio of 45% or less

• Minimum down payment of 3% with private mortgage insurance

• Minimum down payment of 20% without private mortgage insurance

• Property appraisal verifying the home’s condition and value

Conventional mortgages are a good fit for you if you meet the requirements and you’re looking for a quicker option. Typically, they require less paperwork than other types of loans and can be obtained in a shorter amount of time.

Government-Backed Mortgages: Local Insights

Government-backed mortgages are popular in the New England region, offering lower down payment requirements and more lenient credit score requisites. New Hampshire residents should particularly look into these three types:

There are three main types of government-backed mortgages:

• FHA Loans: FHA loans are typically easier to qualify for than conventional mortgages for those with lower credit scores. The minimum score requirement for this loan is 580, and you usually need a minimum down payment of 3.5%. FHA loans can only be used for the buyer’s primary residence. FHA loans are a popular choice in New Hampshire for those with lower credit scores. 

• VA Loans: VA loans are for veterans and active-duty military members. They have no down payment requirement and no maximum loan amount. There’s no minimum requirement for credit score by the federal agency, but many lenders require at least a 660.

• USDA Loans: USDA loans are for rural homebuyers. They have no minimum down payment, but you must live in an eligible geographic location to receive this type of loan. Lenders typically look for a credit score of at least 640. USDA loans are available to rural homebuyers and are quite applicable to certain less urban parts of New Hampshire and New England.

Government-backed mortgages can be a great option for those seeking more flexibility on interest rates, credit score requirements, and down payments. However, some of these options take longer, require extra paperwork and additional insurance, and if you don’t meet the specific eligibility requirements for the type of loan you’re seeking, you may be out of luck.

Fixed-rate Mortgages: A Wise Choice for New England Stability

Fixed-rate mortgages have an interest rate that stays the same for the life of the loan. This means that your monthly payments will be the same every month—no matter what’s going on with the economy and interest rates overall. Fixed-rate mortgages are a good option for people who want to lock in an interest rate and have their monthly payments stay the same. This type of mortgage can be particularly beneficial in New England, where housing markets tend to be more stable compared to the national average.

There are two main types of fixed-rate mortgages:

• 30-year fixed-rate mortgages: These mortgages have a term of 30 years and a fixed interest rate for the entire term.

• 15-year fixed-rate mortgages: These mortgages have a term of 15 years and a fixed interest rate for the entire term.

Adjustable-rate Mortgages (ARMs): Proceed with Caution 

Adjustable-rate mortgages have an interest rate that can change over time. This means that your monthly payments could go up or down depending on standard interest rates. ARMs typically start with a low introductory interest rate, which makes them attractive for people who want a low monthly payment in the short term. However, ARMs can be risky, as your monthly payments could go up significantly if interest rates go up. In the fluctuating climate of New England’s housing market, especially with historic homes and waterfront properties in the Lakes Region, ARMs can be risky. Proceed cautiously and consult local financial advisors to see if this is the right choice for you.

There are two main types of ARMs:

• 3/1 ARM: This mortgage has a fixed interest rate for the first three years, after which it adjusts annually.

• 5/1 ARM: This mortgage has a fixed interest rate for the first five years, after which it adjusts annually.

Which type of mortgage is right for New England Homebuyers?

The best type of mortgage for you depends on your individual circumstances. If you have good credit and a large down payment, a conventional mortgage might be the best option for you. If you have less-than-perfect credit, a government-backed mortgage might be a better choice. And if you want to know exactly how much your mortgage payments will be each month, a fixed-rate mortgage is the way to go.

Buying a home is a big decision, but it's also an exciting one. By taking the time to choose the right mortgage, you can make the process a little bit easier and ensure that you're getting the best possible deal.

Choosing a mortgage in New Hampshire and the broader New England area often requires specific local knowledge. I would be more than happy to connect you with our a local lender so you can tailor your mortgage decision to your individual circumstances and the unique features of the local housing market.

Our trusted and preferred lender is Corey Scott from Harbor One, feel free to reach out to him at (207)-400-6258.

Want to know everything there is to know about buying and selling a house in the New Hampshire Lakes Region Area?  Check out our other Blog Posts!