Types of Real Estate Loans: The Factors That Decide Yours
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Every type of real estate loan runs on the same four levers: down payment, credit, debt-to-income ratio, and the extra costs stacked on top of the payment itself. Put down less than 20%, and most loans add PMI. Get the four levers right, and loan types become interchangeable. In NYC, a co-op board adds a fifth factor no lender controls.
We walk buyers through these factors before the loan type, not after: the factors decide the type, not the other way around.
Factors to consider before buying a house, loan type aside
Fixed or adjustable, conventional or government-backed, the differences between loan types matter less than whether you actually qualify for good terms on any of them. Our mortgages and financing hub breaks down every type in detail; this page covers what actually decides which one fits.
Four factors do most of the work: down payment, credit, debt relative to income, and costs layered on top of principal and interest. These are the same factors to consider before buying a house, generally, loan type aside.
Down payment size and interest rate: what a bigger payment buys you
A larger down payment results in a smaller loan and a more favorable rate in one move. It reduces the amount you finance directly, which lowers your monthly payment. It also often earns a better interest rate, since a lower loan-to-value ratio means less risk for the lender.
Putting down less than 20% typically triggers private mortgage insurance, an added monthly cost that protects the lender, not you. It stays until you build enough equity to drop it. Our PMI guide covers exactly when that applies and what it costs. Our down payment guide covers typical NYC down payment sizes by property type.
What affects your mortgage interest rate
Your credit score is the number a lender actually negotiates on. Along with your down payment, it’s the single biggest lever on the rate you’re offered. A meaningfully higher score can mean a lower rate and real savings over the loan’s life.
Loan term matters too. A 15-year loan typically carries a lower rate than a 30-year loan on the same property, though the monthly payment runs higher. Debt-to-income ratio factors in as well. Lenders generally want your total monthly debt, mortgage included, to be under roughly 43% of gross income, though specific limits vary by loan type and lender.
Extra costs of taking out a mortgage, beyond the payment itself
Every mortgage carries a second, quieter bill next to the payment itself. Before signing, budget for:
| Cost | What it covers |
|---|---|
| Property tax | Ongoing, tied to assessed value |
| Homeowners insurance | Required by the lender on condos and houses |
| PMI | Applies if you finance more than 80% of the price |
| HOA or co-op maintenance | Building costs vary widely by building |
Our closing cost calculators run these alongside your loan amount, so nothing surprises you at the closing table.
The NYC factor is not mentioned in the national checklist mentions
For many NYC purchases, a board vote that the lender has no say in makes the final call, particularly in co-ops. A bank can approve your loan in full, and a co-op board can still say no. Some ask for a larger down payment and more liquidity than the lender requires. Our Southbridge Towers guide walks through the specific requirements of one real building as an example.
Board review also adds real time to a purchase, often weeks beyond the mortgage approval itself. Our guide to how a mortgage works covers the lender side of the timeline; the board side runs on its own separate clock.
What we walk clients through before they pick a loan
We start with the factors first, the loan type second. Down payment, credit, debt-to-income, and the building’s own requirements narrow the real options fast, usually to one or two loan types worth comparing seriously.
As Georges puts it, “it’s all about the numbers and the execution,” and picking a loan type before those numbers are settled tends to waste time on options that were never realistic. On average, our commission rebate amounts to roughly $22,000 at closing, which several clients apply directly toward a larger down payment. Run your specific numbers on the closing cost calculators before you commit to any one loan type.
Common questions
What are the main types of real estate loans? Fixed-rate, adjustable-rate, conventional, and government-backed loans, such as FHA and VA, are the most common. Our mortgages and financing hub covers each in detail.
What factors should I consider before taking a real estate loan? Your down payment size, credit score, debt-to-income ratio, and the extra costs (taxes, insurance, PMI, and HOA or maintenance) on top of principal and interest.
Does my down payment affect my interest rate? Often yes. A larger down payment lowers the lender’s risk, which can mean a better rate. It also helps you avoid PMI if it gets you past the 20% threshold.
What extra costs come with a mortgage besides the payment? Property tax, homeowners insurance, PMI if you put down less than 20%, and HOA or co-op maintenance, depending on the property type.
Why does a co-op board matter if my mortgage is already approved? A co-op board applies its own financial standards, sometimes stricter than the lender’s, and can decline a buyer the bank already approved. Confirm a building’s specific requirements before you commit to a loan.
Nicole Fishman Benoliel co-founded NestApple in 2017. She's a lawyer admitted to the New York bar - her law degree is from La Escuela Libre de Derecho in Costa Rica, with further study at IE Business School in Madrid and an LLM from Fordham in New York. She does not act in a legal capacity at NestApple; every client is referred to an attorney who handles real estate deals full time.
