TRADITIONAL
LOANS
Conventional and government loans each have their own advantages and disadvantages. Conventional loans may offer more flexibility and offer lower PMI if you meet the credit and income qualifications. Government loans, on the other hand, are great for lower income borrowers with relatively lower credit scores because they increase accessibility to home ownership.
FHA LOANS
Government issued loans (also called FHA loans) are insured by the Federal Housing Administration against default. They often have less stringent measures for qualification and are designed to enable more people to buy a home.
FHA loans are typically easier to qualify for than conventional loans. This is because FHA loans are backed by the government against default, making lenders more comfortable in providing these mortgages.
FHA loans are typically accessible to medium to low credit scores. In fact, credit scores of 580+ can qualify for down payments as low as 3.5% of the purchase price, while scores between 500- 579 can qualify with 10% down payment.
FHA loans are fixed in their structure, and restricted to owner occupied primary residences only.
CONVENTIONAL LOANS
Conventional loans are the ones that are issued by financial institutions and are not backed by the government. They are issued upon an agreement between the borrower and the lender based on the borrower's financial history.
Conventional loans typically have many options available in terms of mortgage rates, properties to buy, and refinancing options. Buyers who qualify for conventional loans will find that they have many more properties to choose from as well as greater flexibility in designing their monthly premiums paid on the mortgage.
Conventional loans can either waive the requirement of mortgage insurance or cancel it once your loan amount drops to a certain limit. Typically, if you pay a down payment of 20% of the value of the home, the mortgage insurance requirement is waived.
Minimum down payment for conventional primary residence loans ranges from 3% - 5% depending on first time home buyer status and loan amount.
VA LOANS
If you are a veteran, thank you for your service! We appreciate the sacrifices you have made in defending our country.
A VA loan is a zero-down payment mortgage option offered to eligible veterans and active duty service members and their families. VA loans are partially backed by the Department of Veterans Affairs (VA) and are issued by private lenders. If you want to use a VA loan to purchase a home, that home must be your primary residence.
VA loans have special benefits only available to eligible veterans, active duty service members, and in some cases, their spouses.
While VA does not require mortgage insurance with less than 20% down, we do want to mention the funding fee.
The VA funding fee is a one-time payment that you will make on a VA home loan. The VA funding fee can be paid for in a variety of ways and by no means has to be paid upfront. When you close on your VA loan, you can choose to pay the VA funding fee by rolling it into the total amount of your loan or pay the full amount at closing. The funding fee is waived if you are a disabled veteran,