By working with a trusted lender, you can confidently choose the loan that best supports your homeownership goals.
Conventional loans are backed by Fannie Mae or Freddie Mac (Government-Sponsored Enterprises) and are available for borrowers with higher credit scores. A down payment can be as low as 3%, but Private Mortgage Insurance (PMI) is required if less than 20% is put down. These loans have stricter credit and debt-to-income (DTI) requirements and must fall within conforming loan limits.
FHA loans, insured by the Federal Housing Administration, are designed for first-time buyers or those with lower credit scores. A down payment of at least 3.5% is required, and borrowers can have higher DTI ratios than with conventional loans. FHA loans come with both upfront and annual mortgage insurance premiums, which protect lenders in case of foreclosure.
VA loans, guaranteed by the US Department of Veterans Affairs, are available to eligible veterans, service members and surviving spouses. No down payment or mortgage insurance is required, though there is an upfront funding fee (1.25%-3.3%), which can be included in the loan. VA loans are only for primary residences.
USDA loans are designed for low-income homebuyers in rural areas, backed by the USDA Rural Development Program. No down payment is needed and income limits apply based on location. A single upfront fee and annual fee are required, which help protect lenders in case of foreclosure.
In conclusion, understanding the key differences between Conventional, FHA, VA and USDA loans is essential for making informed decisions when purchasing a home. Each loan type serves a specific purpose, catering to different financial needs and borrower profiles. Whether you’re a first-time buyer, a veteran or someone looking to purchase in a rural area, there’s a mortgage option that can fit your circumstances. By working with a trusted lender, you can confidently choose the loan that best supports your homeownership goals. QCBN
By Greg Riordan
Greg Riordan is a loan officer with Legacy Mutual Mortgage. For additional information or to get in touch with Greg, visit legacymutual.com/officers/greg-riordan or call 928-427-5156. You may find his office at 325 W Gurley St #102, Prescott, AZ 86301. Greg cares about the people that choose to trust him with the biggest asset in their lives – their home. He will give straight, honest answers with exceptional advice whether you are refinancing your home to pay off debt, lowering your rate, reducing the length of your loan or looking to purchase your first or next dream home. Greg Riordan, NMLS # 832841 | Gardner Financial Services, LTD., dba Legacy Mutual Mortgage, NMLS #278675, an Equal Housing Lender.
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