Finding the right mortgage for your home can be a tricky proposition, but banks and other lenders are offering various options to meet your needs as the housing market rebounds.

Smaller down payments are still an option if you meet the requirements, depending on the lending institution.

While some Millennials are dealing with student loan debt and lack the cash to opt for a traditional 30-year mortgage requiring a 20% down payment, Federal Housing Administration (FHA) loans remain an option.

FHA loans were the dominant choice among many first time home buyers until recently. With a loan from the FHA, buyers have the option to finance 96.5% of a home’s price and put just 3.5% down.

Unlike conventional financing, 100% of the down payment could be a gift, so borrowers are able to secure a loan without putting any of their own money down, said Malcolm Hollensteiner, director of retail lending products and services at TD Bank, a financial institution based in a Cherry Hill, N.J. One advantage is that the underwriting criteria are more flexible than conventional mortgage loans.

While those factors are appealing to many borrowers, the FHA has increased its mortgage insurance costs which makes this type of loan more expensive for the buyer and has led to the number of first time buyers who obtained FHA loans to drop dramatically.

While many home buyers are still seeking the FHA loan, it is not as popular since the monthly mortgage insurance rates have risen, said Sin-Yi Lamberston, real estate and mortgage broker at ERA Yes! in Glendora, Calif. However, FHA loans allow consumers to borrow more with a lower credit score.

 

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