4 Basic loan types

FHA loans have been helping people become homeowners since 1934. How do we do it? The Federal Housing Administration (FHA) - which is part of HUD - insures the loan, so your lender can offer you a better deal.

• Low down payments
• Low closing costs
• Easy credit qualifying

VA home loans can be used to:

• Buy a home, a condominium unit in a VA-approved project
• Build a home
• Simultaneously purchase and improve a home
• Improve a home by installing energy-related features or making energy efficient improvements
• Buy a manufactured home and/or lot
• To refinance an existing VA-guaranteed or direct loan for the purpose of a lower interest rate
• To refinance an existing mortgage loan or other indebtedness secured by a lien of record on a residence owned and occupied by the veteran as a home

Conforming conventional loans are loans that adhere to the standards set by Fannie Mae and Freddie Mac, including maximum loan amounts.

In 2019, the standard limit for a conforming conventional mortgage is $484,350 for a single-family home that you intend to live in. For borrowers in high-cost areas, the limit can be as high as $726,525.

If you want to borrow more than the lending limits for conforming loans, you should look for lenders that specialize in jumbo mortgage loans.

Jumbo loans typically require higher credit scores than conforming loans (think 700 or higher), and you may also need to have a lower debt-to-income ratio (DTI) and put down a larger down payment.

Even with those things, you may end up with a higher interest rate than a conforming loan because the larger loan amount represents a bigger risk to the lender.

USDA loans differ from conventional, or nongovernment-backed, mortgages in important ways.

• You don’t typically need a down payment with a USDA loan. The minimum down payment for most conventional loans is 5%, although some borrowers with excellent credit may be able to obtain a loan with just 3% down.
• USDA loans may have a much lower interest rate than conventional loans.
• USDA loans are intended for people with lower income. While conventional lenders will approve you for loans more easily with a higher income, USDA loans all have income limits that prevent you from qualifying if you make too much.
• There are strict limitations on properties for USDA loans. Conventional loans can be obtained to buy properties anywhere, but you can obtain USDA loans only for properties in certain locations.
• USDA loans charge an upfront fee and mortgage insurance premiums. Many conventional lenders charge fees for a loan, but they may be negotiable. And, while you’ll typically have to pay mortgage insurance on a conventional loan if you don’t have 20% down, you can request to stop paying this monthly cost once you’ve built up enough equity.