Generally, conforming lenders offer the best interest rates on loans up to $417,000. They follow strict guidelines and verify all documentation. You will need a two year work history, verified by your last two W2's or tax returns, your last two paycheck stubs, a clean credit history, and no bankruptcies in the past two years. You can borrow up to 100% of the home's value, although if you go over 80% of the home's value, you will be required to pay PMI and will be forced to escrow your taxes and insurance. The amount of monthly housing expense you will qualify for will be calculated by your debt to income ratio(DTI).
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FHA Lenders
FHA lenders basically follow conforming guidelines. The loan limits vary from county to county(Click here to check the loan limits in your area). FHA was designed for first time home buyers, low to moderate income borrowers, people with little to no credit history and will only lend up to 97% of the home's value. FHA credit guidelines are a little more relaxed than conforming guidelines. Keep in mind that with FHA backed loans you will also be required to pay a one time upfront MIP funding fee of 1.5% percent of the total loan amount. With an FHA loan you will still be required to pay monthly PMI if you borrow more than 80% of the home's value, but it is at a discounted rate.
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Alt-A Lenders
Alt-A lenders follow conforming guidelines and rate sheets but allow alternate income documentation such as stated income, no income verification, no debt to income ratio consideration, stated assets, no assets and no documentation loans. Though they allow this type of documentation, it will usually mean an increase in interest rate, and lower loan to vale.
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Subprime Lenders
Subprime lenders offer the most relaxed credit guidelines as well as all of the income documentation types previously described. These loans come at a high interest rate and high cost.
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Hard Money Lenders
Hard money lenders fund loans based on the amount of equity in the home. Generally hard money lenders will only lend up to 65% of the value of the home. Hard money lenders are widely used by real estate investors because they will allow loans on irregular and unliveable properties, as well as provide cash to rehabilitate the property. Hard money loans are used as a short term solution with extremely high interest rates and closing costs.
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