The Complete Guide to Home Financing in 2026

Buying or leveraging a home is the biggest financial decision most people make. The problem? There are dozens of financing options, and the right one depends entirely on your situation. Pick wrong and you'll pay thousands more than necessary. Pick right and you'll build wealth faster than you thought possible.

This guide breaks down every major home financing option available in 2026 — what each one is, who it's for, what it costs, and when to use it.

The Financing Landscape

Home financing falls into four categories:

1. Primary residence loans — buying the home you'll live in
2. Investment property loans — financing rental or flip properties
3. Equity access products — tapping into equity you've already built
4. Creative financing — alternatives when traditional lending doesn't fit

Let's break down each one.

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Primary Residence Loans

Conventional Loans

The bread and butter of home financing. Backed by Fannie Mae or Freddie Mac, conventional loans offer the best rates for borrowers with strong credit.

Key numbers:

• Minimum credit score: 620 (680+ for best rates)
• Down payment: 3% to 20%
• PMI required below 20% down ($80–$250/month on a $400K loan)
• Debt-to-income ratio: up to 45% (50% with strong compensating factors)
• 2026 conforming limit: $766,550 (higher in high-cost areas)

Best for: W-2 employees with 700+ credit, stable income, and at least 5% down.

Cost example: On a $400,000 home with 10% down at 6.75%, your monthly payment is $2,333 (P&I) plus ~$150 PMI = $2,483 total. PMI drops off at 78% LTV.

FHA Loans

The government-backed option designed for first-time buyers and those with imperfect credit.

Key numbers:

• Minimum credit score: 580 (500 with 10% down)
• Down payment: 3.5%
• Mortgage Insurance Premium (MIP): 1.75% upfront + 0.55% annually
• DTI: up to 57% with compensating factors
• 2026 floor limit: $498,257

The catch: MIP never goes away on FHA loans with less than 10% down. On a $350,000 loan, that's $1,925/year — forever. Many FHA borrowers refinance to conventional once they hit 20% equity.

Best for: First-time buyers with 580–700 credit scores and limited savings.

VA Loans

The best mortgage product in America — if you qualify.

Key numbers:

• Down payment: 0%
• PMI: none
• Funding fee: 1.25%–3.3% (waived for disabled veterans)
• No maximum DTI (residual income test instead)
• No loan limit for full-entitlement borrowers

Best for: Active military, veterans, and surviving spouses. There's no reason to use any other product if you have VA eligibility.

USDA Loans

Zero-down loans for rural and suburban areas — more areas qualify than you'd think.

Key numbers:

• Down payment: 0%
• Guarantee fee: 1% upfront + 0.35% annually
• Income limits: 115% of area median income
• Property must be in USDA-eligible area

Best for: Moderate-income buyers in eligible areas. Check USDA's eligibility map — many suburbs qualify.

Jumbo Loans

For homes above conforming loan limits.

Key numbers:

• Minimum credit score: 700–720
• Down payment: 10%–20%
• Rates: 0.25%–0.50% higher than conforming (gap has narrowed in 2026)
• Reserves: 6–12 months typically required

Best for: Buyers in high-cost markets (SF, NYC, LA, Seattle) purchasing above $766,550.

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Investment Property Loans

DSCR Loans

The game-changer for real estate investors. DSCR (Debt Service Coverage Ratio) loans qualify based on the property's rental income — not your personal income.

Key numbers:

• Minimum DSCR: 1.0–1.25 (rental income ÷ mortgage payment)
• Down payment: 20%–25%
• Credit score: 660+
• Rates: 7.0%–8.5% (2026)
• No tax returns, W-2s, or employment verification required

The math: If monthly rent is $2,000 and the total mortgage payment (PITIA) is $1,600, your DSCR is 1.25 — which most lenders approve.

Best for: Investors buying rental properties, especially those who are self-employed or own multiple properties that complicate traditional underwriting.

Learn more: What Is a DSCR Loan? | DSCR Loan Requirements 2026

Conventional Investment Property Loans

Traditional financing for rentals, with stricter requirements than primary residence loans.

Key numbers:

• Down payment: 15%–25%
• Rate premium: 0.5%–0.75% above primary residence rates
• Maximum financed properties: 10 (Fannie Mae)
• Reserves: 6 months per property
• Full income documentation required

Best for: Investors with 1–4 properties who have strong W-2 income and want the lowest rates.

Hard Money Loans

Short-term, asset-based loans for flips and bridge financing.

Key numbers:

• Rates: 10%–14%
• Points: 2–4 origination points
• Term: 6–18 months
• LTV: 65%–75% of ARV (after-repair value)
• Closing speed: 7–14 days

Best for: Fix-and-flip investors who need fast closing and plan to sell or refinance within 12 months.

Portfolio Loans

Loans held by the originating bank (not sold to Fannie/Freddie), with flexible underwriting.

Best for: Investors who don't fit conventional boxes — unique income, many properties, or non-standard property types.

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Equity Access Products

HELOC (Home Equity Line of Credit)

A revolving credit line secured by your home equity. Draw what you need, pay interest only on what you use.

Key numbers:

• Rates: Prime + 0% to 2% (variable) — currently 7.0%–9.0%
• Draw period: 5–10 years (interest-only payments)
• Repayment period: 10–20 years (principal + interest)
• Maximum CLTV: 80%–90%
• Closing costs: $0–$2,000

Best for: Homeowners who need flexible access to funds — home improvements, debt consolidation, investment property down payments.

Learn more: HELOC Requirements | HELOC Rates 2026

Home Equity Loan

A fixed-rate, lump-sum second mortgage.

Key numbers:

• Rates: 7.5%–10.0% (fixed)
• Term: 5–30 years
• Closing costs: 2%–5% of loan amount
• Maximum CLTV: 80%–85%

Best for: Homeowners who want a predictable fixed payment for a specific project or expense.

Cash-Out Refinance

Replace your existing mortgage with a larger one and pocket the difference.

Key numbers:

• Maximum LTV: 80% (conventional) or 85% (FHA)
• Rates: current market rates (replaces your existing rate)
• Closing costs: 2%–5% of new loan amount
• Seasoning: 6–12 months after purchase

Best for: Homeowners whose current rate is already at or near market rates, and who need a large lump sum.

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Creative Financing

Seller Financing

The seller acts as the bank — you make payments directly to them.

Best for: Deals where the buyer can't qualify traditionally or the seller wants installment sale tax benefits.

Subject-To

Buy a property "subject to" the existing mortgage staying in place.

Best for: Experienced investors acquiring properties with below-market rate mortgages.

Assumable Mortgages

Take over the seller's existing mortgage at their original rate and terms.

Best for: Buyers who can find FHA or VA mortgages originated at 3%–4% rates during 2020–2022.

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How to Choose the Right Financing

Step 1: Define your goal

• Buying a home to live in → Primary residence loans
• Buying a rental property → DSCR or conventional investment
• Accessing existing equity → HELOC, HE loan, or cash-out refi
• Flipping a property → Hard money or bridge loan

Step 2: Assess your profile

• Credit score above 740 → You'll get the best rates on any product
• Self-employed or complex income → DSCR or bank statement loans
• First-time buyer with limited savings → FHA or USDA
• Military service → VA loan, always

Step 3: Compare total costs Don't just compare rates. Compare:

• Total interest paid over your expected hold period
• Closing costs and points
• PMI or MIP costs
• Prepayment penalties
• Opportunity cost of your down payment

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The Bottom Line

There's no single "best" home financing option — there's only the best option for your specific situation. A VA loan is unbeatable for those who qualify. DSCR loans have revolutionized investor financing. HELOCs give homeowners flexible access to their equity.

The most expensive mistake in home financing isn't choosing a slightly higher rate — it's choosing the wrong product entirely. A first-time buyer who uses a conventional loan when they qualify for VA leaves thousands on the table. An investor who uses conventional financing when DSCR would work pays for unnecessary income documentation and faces stricter limits.

Ready to find the right financing? Get started with HonestCasa — we'll match you with the best product for your situation.

FAQ

What's the easiest home loan to qualify for?

FHA loans have the most lenient requirements: 580 credit score, 3.5% down, and up to 57% DTI ratio. USDA loans are also accessible with 0% down but have geographic and income restrictions.

Can I get a mortgage with no money down?

Yes — three options: VA loans (military), USDA loans (eligible areas), and down payment assistance programs (varies by state and city). Some conventional programs also offer 3% down with grants covering part of it.

What credit score do I need for the best mortgage rates?

740+ gets you the best conventional rates. Each 20-point drop below that adds roughly 0.125%–0.25% to your rate. At 660, you're paying about 0.5%–1.0% more than a 740+ borrower.

Should I get a HELOC or home equity loan?

HELOC if you want flexible access and can handle variable rates. Home equity loan if you need a specific amount and want fixed payments. For amounts over $50,000 with a defined use, the home equity loan's rate certainty usually wins.

How much can I borrow with a DSCR loan?

Most DSCR lenders go up to $2–$3 million per property. Your maximum depends on the property's rental income relative to the mortgage payment. A property renting for $3,000/month can typically support a $350,000–$400,000 loan.