What Loan Program is right for you?
At first glance, the several types of mortgage loans may look like a secretive alphabet soup. We see it as our responsibility to help put the cookies where everybody can reach them…moreover we are here to help make sense of it all.
These are the most common type of loans you’ll encounter. As these are not insured or guaranteed by a government agency, they’re generally considered a higher risk for lenders, so credit and income requirements may be stricter.
VA - Veterans Administration
I’m a veteran myself and love serving other vets. A VA loan is any home loan made by private lenders and guaranteed by the U.S. Department of Veterans Affairs (VA). VA loans are a benefit available to veterans and offer a great option because they don’t require a down payment as long as the sales price doesn’t exceed the appraised value or mortgage insurance.
Veterans and active members of the military should check their eligibility before applying for such a loan.
FHA loans, which are federally insured by the Federal Housing Administration, require a down payment as low as 3.5 percent and tend to have looser guidelines.
These loans may be a good option for borrowers with less cash and a lower credit score.
“FHA loans require upfront mortgage insurance and annual mortgage insurance that you generally pay monthly over the course of the term” Iit’s wise to compare your options with a conventional loan to see which serves your needs better.
A jumbo loan is a loan for an amount that exceeds the conforming loan limits for the county where the property is located. Because it doesn’t “conform” to the loan limit, a jumbo loan is by definition nonconforming.
The down payment requirements differ depending on the scenario and qualifications. You may need a higher credit score to be approved for a jumbo loan, due to the higher risk the lender is taking on. You also need to have adequate income to afford the larger payments on a greater loan amount.
Government-insured U.S. Department of Agriculture (USDA) loans do not require a down payment and may have lower mortgage insurance premiums than other options. USDA loans require borrowers to meet certain household income limits for the area where they want to buy a home, says Banfield.
The house must also be located in an eligible rural area, but you might be surprised about what qualifies as “rural.” Areas that are in the outer suburbs may qualify for this program.