Conventional: Low rates for borrowers with excellent credit. No limits on income, area or occupancy type. Simply put, a conventional loan is neither insured nor backed by the federal government. This is why qualifications for conventional loans are a bit stricter and the amount needed for down payment is often higher. Recently, that number has been lowered, but you will still need to put down 20% to avoid paying private mortgage insurance.
FHA: Stands for Federal Housing Administration and that is the entity that backs these loan types. It is managed by HUD (Housing and Urban Development.) Many people think these loans are limited to first time home buyers when in fact, they are open to a number of different borrowers. This program allows you to borrow money with as little as 3% down; however, you will have to pay for mortgage insurance for the life of the loan which will increase your monthly payments.
VA: Veteran’s Affairs backs these loans and is a program available to military members and their families. These programs are also insured and backed by the federal government. The biggest advantage of these loans is that the borrower needs no down payment — 100% of these loans can be financed.
USDA: United States Department of Agriculture offers loans to those borrowing for purchase in rural communities who meet certain income requirements. Generally it cannot be higher than 115% of the adjusted area median income. These median incomes vary by county and the label of “rural” is also frequently changing, especially in high growth areas.
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