Loan Types

Choosing the right mortgage loan is very important. You should be comfortable with the total mortgage payment and funds required at closing before shopping for a home. During your pre-approval application, your loan officer may provide various estimates on the following loan types based on your specific financial situation.

Conventional FHA

Conventional mortgage loans are backed by Fannie Mae and Freddie Mac. All buyers must meet the underwriting requirements of the secondary market (Fannie & Freddie). The loan repayment term may vary from 10-30 years. While most mortgage loans have a fixed rate over the life of the loan, a buyer may choose a conventional loan with an adjustable rate if that better suits their needs. Down payment requirement is as little as 3%-5% of the sale price. With a 20% down payment, you are not required to pay mortgage insurance as part of your payment. Credit scores above 740 receive the lowest rates available on the secondary market. FHA (Federal Housing Administration) is a government loan that is typically offered to first time buyers with little or lacking credit history. However, FHA loans are also for repeat buyers. The down payment requirement is 3.5%. Government backed loans are typically more lenient with credit blemishes and lower scores. The interest rate is not as affected by a score under 720 compared to conventional financing. If you do not have 20% down, the monthly mortgage insurance is often lower with FHA at lower credit scores. FHA does have a maximum mortgage loan amount specific to your area. Your loan officer can provide this amount. Regardless of down payment, FHA loans have an upfront mortgage insurance premium and monthly mortgage insurance premium.

Loan Types continued

VA USDA

VA (Veterans Administration) is a government loan offered to veterans or active military members. In some cases, a veteran’s spouse may obtain a VA loan. VA loans have 0% down payment requirement and NO monthly mortgage insurance. Depending on the veteran’s status, the upfront funding fee may be waived. Upfront funding fees vary. It is possible to have more than one VA loan at the same time. Your loan officer can check your eligibility to determine if a down payment is required on your second VA loan. Various military documents are required for VA financing. USDA/RHS (US Dept. of Agriculture/Rural Housing) is a government loan that requires specific property eligibility in addition to being subject to maximum household income limits. Requires 0% down payment. USDA/RHS loans have an upfront guaranty fee and monthly guaranty fee. However, the monthly amount is discounted quite a bit compared to FHA and Conventional with lower credit scores. Your loan officer can determine if you meet household income and property guidelines for USDA/RHS 100% financing.