What Kind of Home Loan Works for Me?
March 30, 2022
Here are four types of mortgages to choose from.
FHA Loan
An FHA loan is one that is insured by the U.S. Federal Housing Administration and granted by lenders who are approved by the agency. FHA loan programs are generally designed with first-time homebuyers in mind, making them easier to qualify for than conventional home loans. With a government organization backing the loans, lenders are protected from losses when granting home loans to borrowers who may otherwise be considered high-risk. That is why FHA loans are known for having less stringent eligibility requirements, with minimum credit scores of 580, a debt-to-income ratio of 43% or less, and a low- down payment of 3.5%.
VA Home Loan
Backed by the U.S. Department of Veterans Affairs, VA home loans are available to active or retired members of the U.S. military, as well as to certain qualifying relatives. Applicants are required to have a certificate of eligibility from the VA in order to apply for a VA loan. This loan type has many of the same benefits as the FHA loans, with lower credit requirements. However, one of the things that makes VA home loans particularly attractive to eligible servicemembers is that they do not require any down payment. In fact, about 90% of VA borrowers put down no money at all when they buy homes.
USDA Mortgage
Similar to both the VA and FHA programs, USDA home loans are designed to make homeownership more affordable for Americans. USDA loans are backed by the United States Department of Agriculture, and meant for borrowers looking to buy homes in qualifying rural areas. Since this loan type is meant for low and moderate-income individuals, the USDA sets income limits for their programs, generally no higher than 115% of the median income for the area.
Conventional Mortgage
Also known as a traditional mortgage, a conventional home loan is one that is not insured by any government agency. That means that you won’t need to meet specific requirements other than those set by the lender.
While conventional loans are the most popular mortgage option, they are at times more difficult to qualify for. They usually have stricter stipulations than other loan types. Most conventional loan lenders require a credit score of 620 or higher and a minimum down payment of 5% with private mortgage insurance required. That being said, conventional loans typically offer lower interest rates compared to other loan types.
It’s important that you know exactly what you are getting into when buying a house, and your mortgage is huge part of that. Talk to a experienced loan officer about your choices, and see what the best mortgage option is for you!
------------------------------
RELATED VIDEOS:
A Good Faith Estimate Provides Mortgage Information
Measuring Your Loan-to-Value Ratio
Monitor Your Credit Score
FHA Loan Articles
January 20, 2025The FHA Streamline Refinance offers a refinance option for those who don't want to cash in on their property's equity but instead want a lower payment or interest rate or who need to get out of an adjustable-rate mortgage. This streamlined program, designed specifically for those already in an FHA-insured mortgage, simplifies the refinancing process with fewer requirements and faster approval times depending on the transaction.
January 16, 2025Want to buy a home and thinking about getting an FHA loan? FHA loans are a great way to make homeownership happen, especially if you're a first-time buyer or don't have perfect credit. But you might wonder, "Can I get more than one FHA loan?"
The short answer is, it's tricky. The FHA itself doesn't say no automatically to having more than one loan. But there's a caveat. FHA loans are about helping you buy a place to live in – your main home base. Because of this, and a few other things, getting multiple FHA loans isn't easy.
January 15, 2025Buying a condo with an FHA loan is an option some don’t consider initially, but it’s worth adding to your list of potential property types. FHA loans for condo units traditionally require condo projects to be on or added to the FHA-approved list. Still, changes in policy over the years allow borrowers to apply for FHA loans on condo units in projects not on the list on a case-by-case basis.
December 30, 2024When applying for an FHA loan, lenders will consider more than just your credit scores and history. They also look at other factors affecting your risk profile and the interest rate they offer you.
One factor is occupancy type. For FHA loans, this is straightforward because these loans require owner occupancy. Investment properties aren't eligible. While conventional loans may have different rates for primary residences, second homes, and investment properties, this isn't a concern with FHA loans.
December 18, 2024Did holiday spending get the better of you? Are you looking for ways to recover your spending plan as you search for a new home?
The holidays are a whirlwind of festivities, family gatherings, and gift-giving. But amidst the cheer, it's easy to lose track of spending. If you're aiming to buy a home in the near future, those extra expenses can have a bigger impact than you might realize, especially if you're considering an FHA loan.
