Loan Types

CONVENTIONAL

A conventional loan is one that is not insured or backed by the federal government. This distinguishes it from other types of home loans that are insured by the government in some way, such as USDA, VA and FHA loans (described below).Conventional home loans might be insured by a private mortgage insurance (PMI) company. But they are not insured by the government. Qualification standards are typically stricter for conventional loans, when compared to government-backed financing. The minimum credit score requirements are 640 or better. Typically this loan offers the best interest rates when the buyer has a 20% down payment. However, the minimum down payment required is 5% of the purchase price. When a buyer puts down less than 20% they will be required to pay a monthly mortgage insurance premium (otherwise known as PMI) until they have reached a 78% loan to value ratio.

FHA

Federal Housing Administration loans are backed by the federal government and administered by participating lenders. The point of FHA-insured loans is to make homeownership more accessible through lower down payments and closing costs along with more flexible credit requirements. The minimum down payment is 3.5% of the purchase price. Potential buyers can qualify for this mortgage with credit scores as 580.

This loan does require the buyer to pay an upfront mortgage insurance premium which may be rolled back on top of the loan amount. There is also a monthly Mortgage insurance premium (otherwise known as PMI) that is collected monthly for the life of the loan.

VA

The U.S. Department of Veterans Affairs (VA) offers a loan program to military service members and their families only. Similar to the FHA program, these types of mortgages are guaranteed by the federal government. The primary advantage of this program is there is NO DOWN PAYMENT required. The credit score requirements are similar to the FHA loan program. The VA buyer will need a minimum credit score of 580 or better to qualify.

USDA

USDA is officially known as the USDA Rural Development Single-Family Housing Guaranteed Loan Program. This loan also provides 100% financing for qualified borrowers who meet credit and income requirements. This type of mortgage is only offered to low- and moderate-income borrowers in designated rural areas. They are also referred to as rural housing loans, or Section 502 mortgage loans. This loan requires a minimum credit score of 640 or better.

You can learn more about this program on the USDA website:
 CLICK HERE

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