How to Choose the Right Home Loan

Choosing the right home loan is one of the most critical steps in your home-buying journey. With so many mortgage options available, it’s important to find the one that fits your financial situation and long-term goals. At Universal 1 Credit Union (U1), we’re here to help you through the process.

In this guide, we’ll walk you through the most common types of home loans, what to consider financially, and how to find the mortgage that’s right for you.

Conventional Loans
A conventional loan is one of the most common options for homebuyers. These loans follow Fannie Mae and Freddie Mac guidelines, making them widely available across the country. With a conventional loan, you’ll find flexibility in both interest rates and down payment options. Typically, a credit score of 620 or higher is needed to qualify. The interest rate you receive will depend on your credit score and the amount you’re able to put down, helping ensure your loan is tailored to your financial situation.

Federal Housing Administration (FHA) loans
FHA loans make homeownership more accessible, especially for first-time buyers or those with limited credit history. With lower credit score requirements and smaller down payment options, they’re a great alternative to conventional loans. FHA loans do require mortgage insurance and often have lower loan limits, but they remain a strong option for many buyers.

VA Loans
VA loans are a valuable benefit for those who serve or have served in the military. Eligible borrowers may include active-duty service members with at least 90 consecutive days of service, veterans, members of the National Guard or Reserve, and surviving spouses of service members who died in the line of duty. VA loans offer significant advantages, including no down payment requirement and no loan limits, making homeownership more accessible for our nation’s heroes.

Jumbo Loans
Jumbo loans, also known as non-conforming loans, are designed for borrowers who need financing beyond standard loan limits. This type of mortgage can cover higher-value properties, including luxury or multi-million-dollar homes. While jumbo loans offer greater borrowing power, they often require larger cash reserves and the ability to manage higher monthly payments.

Fixed-Rate Mortgage

• Steady monthly payments with an interest rate that never changes.
• A great choice if you plan to stay in your home long-term.

Adjustable-Rate Mortgage (ARM)

• Starts with a lower initial rate that may adjust over time.
• A smart option if you plan to sell or refinance in a few years.

U1 Tip: Not sure which loan is right for you? Our mortgage team is here to explain your options and guide you toward the best fit.

Evaluate Your Financial Situation

Before you choose a loan, take a close look at your finances. Lenders typically review:

• Down Payment – A larger down payment lowers your monthly payment and may eliminate private mortgage insurance (PMI).
• Credit Score – A higher credit score often means a better rate. Improving your credit could save you thousands over time.
• Debt-to-Income Ratio (DTI) – Lenders compare your monthly debt to your income to gauge affordability.
• Loan Term – Decide if you’d prefer smaller monthly payments over a longer period (30 years) or paying your loan off faster with a shorter term (15 years).

U1 Tip: Use our mortgage calculator to estimate what fits best within your budget.

Compare Rates and Fees

Interest rates and fees directly affect the cost of your mortgage.

Key items to review include:

• Annual Percentage Rate (APR) – Reflects the true cost of borrowing, including fees.
• Closing Costs – Usually 2%–5% of your loan amount.
• Discount Points – An upfront payment option to lower your long-term rate.

Example: On a $300,000 loan, closing costs at 3% equal $9,000.

Consider Your Long-Term Goals

Your plans for the future should guide your loan choice:

Staying long-term → A fixed-rate mortgage provides stability.

Selling or refinancing in a few years → An ARM could save money early on.

Paying off quickly → A shorter loan term means less interest paid over time.

Work with a Trusted Lender

Who you choose to work with matters. At U1, we pride ourselves on being more than a lender—we’re your financial partner.

• Personalized service from local mortgage experts.
• Flexible loan options tailored to your goals.
• Not-for-profit advantage—we exist to serve members, not shareholders.

Review Before You Sign

Always read the fine print. Be sure to ask about:

• Prepayment penalties.
• Refinancing options.
• Any fees that aren’t clearly explained.

U1 Tip: Never hesitate to ask questions—our team is here to make sure you feel confident every step of the way.

Choosing the right home loan is one of the most important financial decisions you’ll make. By understanding your options, reviewing your finances, and considering your long-term goals, you’ll be well-prepared to move forward with confidence.

Visit a local office, send a message, email or give us a call to get started on your homeownership journey. 

mortgageservices@u1cu.org   |  800-762-9555 ext 424  |  NMLS #652486