The most common loan options available for purchasing a home are Conventional, FHA and VA.
A brief description of each is below.
Conventional Loan
A conventional loan is a mortgage that is not guaranteed or insured by any government agency.
- The most common down payment amounts are 3% (first time homebuyers), 5% (non-first-time homebuyers) & 20%
- Typically requires a credit score of at least 620
- Mortgage insurance is only required for loans with less than a 20% down payment
- Loan Limit is $766,550
- Gifts are allowed
FHA Loan
An FHA loan is a mortgage that is insured by the Federal Housing Administration
- Generally easier to qualify for than conventional loans
- 3.5% down payment (minimum)
- Typically requires a credit score of at least 580
- In most cases, mortgage insurance is required and remains for the life of the loan
- Loan limit is $498,257
- Gifts Are Allowed
VA Loan
A VA Loan is a 0% down payment mortgage available for military veterans and active military personnel. VA loans are issued by private lenders and are guaranteed by the U.S. Department of Veterans Affairs (VA).
- 0% down payment
- Typically requires a credit score of at least 620
- Mortgage insurance is not required
- Gifts are allowed
- A VA funding fee of 0 to 3.3% (this fee may be financed) of the loan amount is paid to the VA
Fixed vs. Adjustable-Rate Mortgages
Fixed-rate mortgages have the same interest rate for the life of the loan. Because of this, your monthly payment (principal and interest) remains the same. Please note… the insurance or taxes portion of your mortgage (if escrowed) may increase or decrease throughout the life of the mortgage
Adjustable-rate mortgage (ARMs) have interest rates that will change over the life of the loan. Since the rate will change, your payment will change, making this option riskier than a fixed rate mortgage