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Home » What Common Types of Loans are Available For Me?

What Common Types of Loans are Available For Me?

You will need to talk to a local lender to determine what type of loan is best for you but this will give you an idea of some different types that are typically used in this area.

FHA Loans- An FHA loan is a mortgage insured by the Federal Housing Administration. Borrowers with FHA loans pay for mortgage insurance (MIP), which is a monthly fee and one time up-front fee that protects the lender from a loss if the borrower defaults on the loan. The MIP is now paid for the life of the loan also. The minimum down payment is 3.5% of sales price which is very appealing because it is one of the lowest down payment loans available. FHA loans also have a lower minimum credit score requirement.

Conventional Loans- A conventional loan is a loan backed by either Fannie Mae or Freddie Mac, the two entities which comprise the Federal Housing Finance Agency (FHFA). Conventional loans on average require a minimum down payment of 5% of sales price and usually require a higher credit score than FHA loans. Conventional loans also have mortgage insurance called private mortgage insurance (PMI) but the cost is typically less than FHA, depending on the borrower’s credit score. The mortgage insurance does fall off the loan when the borrow pays down the loan to 80% of the value of the home. Conventional loans are typically for higher credit score borrowers.

VA Loans- A VA loan is a mortgage loan in the United States guaranteed by the U.S. Department of Veterans Affairs (VA). The VA loan was designed to offer long-term financing to eligible American veterans or their surviving spouses (provided they do not remarry). Most lenders are qualified to provide VA loans. VA loans are 100% and do not require a down payment which makes it a very appealing product. VA loans do require whats called a VA funding fee, which is a fee used to offset the cost of the loan to the taxpayers. VA loans do not have mortgage insurance, which also makes it a great option vs. FHA loans that do require MIP.

USDA Rural Development Loans- USDA loans are mortgages backed the U.S. Department of Agriculture as part of its USDA Rural Development Guaranteed Housing Loan program. USDA loans are available to home buyers with average credit and offer 100% financing with reduced mortgage insurance premiums, and feature below-market mortgage rates. In order to be eligible for many USDA loans, household income must meet certain guidelines. Also, the home to be purchased must be located in an eligible rural area as defined by USDA. If you do meet guidelines for income and area, this is a very good loan program.

*interest rates and terms are subject to change and are subject to applicants credit, debit, and income, and all information deemed reliable but would need to be confirmed with lender