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. It is the most common type of mortgage.
- 3% or 20% down payment
- 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 $453,100
- Gifts are allowed
- Interest rates are usually higher than FHA and VA mortgages, but the payment may still be lower if the loan doesn’t require mortgage insurance
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
- 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 $294,515
- 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).
- Generally easier to qualify for than conventional and FHA loans.
- 0% down payment
- Typically requires a credit score of at least 580
- 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 remains the same
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