Last Updated on June 10, 2021 by Maggie Looker
Buying a home almost always requires obtaining a home mortgage loan to pay for it. There are several mortgage programs available to Registered Nurses. But, knowing which is best for you can take some research. We outline the most common home mortgage programs for registered nurses, and how Homes for Heroes can help you save even more money when buying a home.
But, before we get too deep into the types of mortgage loans available to registered nurses, we first recommend determining how much house you can afford. Knowing some of these numbers will help you determine which type of home loan could be best for you. This mortgage calculator is a great tool to estimate your monthly mortgage payment. Once you know what you can afford, we can cover the four main types of home loans: Conventional loan, FHA loan, USDA loans, and VA loan.
As a registered nurse, chances are you qualify for more than one type of mortgage. Our Homes for Heroes mortgage specialists will work with you and your finances to determine which home loan type will work best for you. Sign up now to get more information from our specialists with no obligation.
Conventional Loans for RN’s
Conventional loans are the most popular home loan, with more than 50% of mortgages being conventional. Because they are less restrictive, there are a fewer number of required fees, and fewer terms to qualify make this a popular home loan program, especially for nurses. Conventional home loans are not backed by the federal government like the other loan types we will cover. Instead, conventional loans follow guidelines set by two private agencies, Freddie Mac and Fannie Mae.
Benefits of a Conventional Loan:
- Buyers will typically receive a lower interest rate due to the credit score and down payment minimums.
- There are no upfront funding fees.
- There is a higher loan amount limit than with government backed loans.
- Registered nurses can have a down payment as low as 3% of the purchase price.
Disadvantages of a Conventional Loan:
- Generally requires a credit score of 620 or higher.
- If your down payment is lower than 20%, you’ll need to pay Private Mortgage Insurance (PMI).
- Guidelines can vary from lender to lender, because they are backed by private institutions than can set their own terms instead of the government.
Also, conventional home loans for registered nurses typically come with 30-year or 15-year duration term. When it comes to the interest rate options on these loans, there are two main types: adjustable-rate mortgage and a fixed-rate mortgage.
Adjustable-Rate Mortgage (ARM)
With an adjustable-rate mortgage (ARM), the interest rate you pay will change after a fixed period of time. Initially, your interest rate will remain the same for 3-10 years, the exact length of time will vary between lenders. This initial interest rate is referred to as the “fixed-rate period.” The interest rate during this fixed-rate period is almost always lower than entirely fixed-rate mortgage interest rates. This makes adjustable-rate mortgages attractive to buyers who don’t plan to stay in their house for the long-term.
After the fixed-rate period, your interest rate will adjust based on the current market interest rate. This means your interest rate could increase or decrease based on the overall financial market. However, the changing interest rate is why ARMs can be risky to buyers and make budgeting difficult. One month your payment could be $1400, the next it could be $1800. Increased regulations following the 2009 housing crisis made most adjustable-rate mortgages come with a cap on how high your interest rate can increase in a given year.
Either way, the rate will continue to adjust based on a schedule predetermined in your loan agreement. Your mortgage lender will walk you through all the dates and terms for this home loan if it’s the best option for you.
With a fixed-rate mortgage, your interest rate will stay the same over the life of the loan. This makes it much easier to plan your monthly budget. Most people choose a fixed-rate mortgage. However, if you don’t plan on being in your home long term, an ARM might be a better option.
FHA Loan for Registered Nurses
FHA Loans are government-backed loans, issued by the Federal Housing Administration. A government-backed loan means that the home will go under government control if the borrower can not pay their mortgage. If the house goes into forbearance, the government will pay the bank bank for the rest of the loan, and then take ownership of the home. This applies for all the remaining types of loan we’ll cover, which are all government-backed.
FHA loans help increase homeownership by reducing credit score requirements for mortgages. Registered nurses and others with lower credit scores also can qualify for these mortgages, thanks to Mortgage Insurance Premiums (MIP) and the Upfront Funding Fee. Their low down payment requirement is also an attractive benefit of these loans. FHA loans are popular with many first-time home buyers for these reasons.
Benefits of a FHA Loan:
- Nurses with a credit score of 580 or higher can qualify for a FHA loan. Scores as low as 500 can be accepted, although the down payment will need to be higher.
- Home buyers can put down as little as 3.5% for a down payment. If nurses have a credit score of 500-579 they may still qualify for an FHA home loan if they are able to put down up to 10% for a down payment.
- Closing costs can sometimes be rolled into the mortgage payment, meaning you’ll pay less up front in a large chunk.
Disadvantages of an FHA Loan:
- Those who go with a FHA home loan will need to pay a Upfront Funding Fee when you go through the closing process. This fee is 2.25% of the total financed amount. This is extra insurance for the government to assume the risk of your loan. Usually, this can be rolled into your mortgage, or you can pay it at your closing.
- All FHA loans must include Mortgage Insurance Premiums (MIP) for the life of the loan. MIP protects the mortgage lender in case you are unable to pay the loan back. This insurance is a big reason why home buyers with lower credit scores and less cash to put down for a down payment still have the ability to purchase a house.
Generally, an FHA home loans for registered nurses will cost a home buyer more money over the life of the mortgage versus a conventional loan, VA loan or USDA loan due to the higher interest rate and MIP costs. However, it still makes homeownership possible for someone with lower down payment funds or credit scores.
USDA Loans for Nurses
Although they’re named after the U.S. Department of Agriculture, USDA loans are not just for farmers. USDA loans are intended to get people to move to rural areas. But, many small towns and even suburbs qualify as rural with these home loans. These home mortgages for registered nurses can be very beneficial, as there is demand for nurses in rural hospitals nationwide. If you live in or are moving to a more rural area anyways, you might as well take advantage of these loans!
USDA loans are available for households and/or properties located in designated rural areas that meet all of the eligibility requirements:
- Home buyer must meet income-eligibility. The USDA loan is intended to make homeownership a reality for low to moderate income families in rural areas. The USDA’s low to moderate income guidelines vary by state.
- Home buyer must personally occupy the dwelling as their primary residence.
- Home buyer must be a U.S. Citizen, U.S. non-citizen national or Qualified Alien.
- Must have the legal capacity to incur the loan obligation.
- Must not have been suspended or debarred from participation in federal programs.
- Demonstrate the willingness to meet credit obligations in a timely manner.
Benefits of USDA Loans:
- It is possible to obtain a USDA loan with no down payment.
- The loan terms offer competitive interest rates.
- Flexible credit guidelines with no minimum credit score. But, most lenders prefer a credit score of 640 or higher. This will vary by lender.
- Available in common fixed-rate terms like 30-year and 15-year loans.
Disadvantages of USDA Loans:
- There is an Upfront Funding Fee, up to 1% of the total financed amount, paid when you close on the loan. Typically this can be rolled into your mortgage payment.
- There is an annual fee, which is 0.35% of the loan. This can also be rolled into your monthly mortgage payments.
- Must meet all the above USDA loan requirements to qualify.
- Must pass a strict inspection of the home. This is to ensure the home is suitable for living, making it less likely you will go into default.
Of all the types of home loans, VA loans are the only mortgage designed exclusively for active and former military members and their families. Several service members who conducted medical duties while they were in the service continue their medical training and careers as civilians. Backed by the U.S. Department of Veterans Affairs, these loans offer great advantages to those who are serving, or who have served in the U.S. Armed Forces.
To get a VA loan, you will need to show your lender a Certificate of Eligibility (COE). This shows your lender that you have double checked with the VA and they approve that you meet the requirements of obtaining a VA loan. The primary criteria to qualify is you must have served in the US military for 90 days of active duty during war time, or 181 days of active duty during peace-time, or you are a surviving spouse of a military member who has also not remarried.
Benefits of a VA Loan:
- No down payment is required, as long as the sale price doesn’t exceed the appraised value.
- No Private Mortgage Insurance (PMI) premiums.
- There is a limit on closing cost charges, and closing costs may be covered by the seller.
- Interest rates are consistently lower than conventional loans and FHA loans.
- Your lender cannot charge a penalty fee if the VA loan is paid off early.
- You do not need to be a first-time home buyer to secure a VA loan.
- The VA may provide some assistance if you run into difficulty making mortgage payments.
Disadvantages of a VA Loan:
- You must meet VA loan requirements to qualify.
- VA charges a funding fee to cover operating costs. However, this fee is usually rolled into the home purchase price.
- Your lender may have additional requirements borrower must meet to take out a VA loan. Because the VA only guarantees 25% of a loan, lenders will typically have additional requirements. Be sure to discuss any additional requirements with your lender.
No matter what type of mortgage loan you choose, Homes for Heroes can save registered nurses money on your next home purchase. A hero working in the healthcare, law enforcement, military, firefighter, EMS, or teaching professions are eligible. Register with no obligation and you’ll be automatically matched with a real estate and mortgage specialist in your area. They will be with you every step of the way, taking the time to explain the process and answer any and all of your questions. Heroes who use our specialists to buy a home save an average of $2,400 in the process. It’s our way to say thank you for your service.