Conventional loans are not backed by a government agency which is why we hear about them in the news backed by Fannie Mae and Freddie Mac. These loans are common for most borrowers.
A conventional loan offers customers a variety of down payment options. The minimum down payment for these loans is 5% of the purchase price. However, if you are a first-time homebuyer, the minimum down payment could be as low as 3% of the purchase price.
With a conventional loan, Sellers are allowed to pay closing costs. Depending on the Buyer’s downpayment, however, there may be a limit to the amount a Seller can pay.
Appraisal guidelines are a little more relaxed with conventional loans, however, the property still has to be in good standing and not have any safety issues.
Conventional loans are usually able to close within 25 days.
Depending on the amount you pay down, you can opt to either have your taxes and insurance escrowed or pay them yourself when they come due.
If you are financing more than 80% of the purchase price you will be required to pay Mortgage Insurance.
FHA loans allow a higher Debt-to-Income ratio and require a 3.5% down payment of the purchase price.
The appraisal guidelines are a little more strict for the property, and health and safety are big factors with the appraisals for FHA loans. For example, when looking at older homes, it is common to see paint peeling around the window seals. The FHA does not allow any peeling paint and would reflect that in the appraisal.
FHA allows the Seller to pay up to 6% of the purchase price for the closing cost. In most cases, the Buyer is only required to pay the 3.5% down at closing provided the Seller pays the closing cost.
FHA loans usually close in 25 days and have monthly mortgage insurance that you are required to pay.
USDA loans are designed for first-time homebuyers or those who don't intend to own more than one property. This is a great program for first-time homebuyers or if you have previously owned a home you could be eligible for this program. A USDA loan has an income limit, meaning the combined household income has a limit of what the Buyer can make. This program has these guidelines since it is not set up for investors, builders, or developers.
This loan is designed to help most of the average families who do not own multiple homes. There is not a stipulation if it’s your first home or your 10th. It offers a low-interest rate with low mortgage insurance. As long as the property appraises for enough to cover the closing costs, you can finance the closing cost into the loan if the Seller doesn't pay them. There are certain metropolitan places that this program does not allow but I can guide you through those options.
VA loans are strictly for anyone that has served in the military. This is a wonderful "pay it back" program for our veterans that hold a special place in our hearts. VA loans allow 100% of the purchase price to be financed. So, if you are eligible for a VA loan, you would not have a down payment or have to pay monthly mortgage insurance. The Seller is also allowed to pay a percentage of the sales price to cover the closing cost. Meaning, if you have a Seller that is paying the closing cost, then the Buyer would not be required to have any money at closing.
To qualify, the veteran must produce a copy of the DD214 form where we can pull his or her certificate of eligibility directly from the VA. This will allow us to know if the VA is charging an upfront fee. If there is an upfront fee, the VA includes this in the loan amount so there isn't an out-of-pocket expense to the Buyer.
Generally, VA loans offer lower interest rates than any other loan product.
Mortgage Insurance is NOT THE SAME with all Mortgage Companies! Know that our investors offer some of the lowest MI rates in the Nation. Know you have options and that you can be paying too much!