A home loan involves a considerable expense, and comparing the available options can be confusing. As home loan requirements differ, understanding which one is best depends on your needs and repayment capacity. Let’s take a look at the different mortgage programs available and their benefits.
Not backed by government agencies, these loans, also called ‘conforming loans, adhere to a standard set by Fannie Mae or Freddie Mac. While available nationwide through various financial institutions, most lenders require a minimum credit score of 620.
Conventional Loan Benefits:
– Low down payments
– Access to adjustable and fixed-rate interest
– Available for all property types
– Loan terms between 10 and 30 years
FHA Home Loans
Federal Housing Administration(FHA) loans have made homeownership more accessible to people with low incomes and lower credit scores.
Benefits of FHA Loans:
– Moderate income requirements
– Loan availability with scores starting at 580
– Down payment assistance can cover closing and entire down payment costs
– Loans available for up to four-unit houses.
Veterans Affairs (VA) Loans
If you have eligible military service history, you could qualify for a VA loan. These loans require no down payment and come backed by the U.S. Department of Veteran’s Affairs.
Pros of VA Loans:
– Zero down payment required
– Fixed-rate loans for 15 & 30 years
– Extremely low-interest rates
– Beneficial for those with low credit scores
Backed by the U.S. Department of Agriculture, these loans aim to provide finance to low- to moderate-income individuals. USDA loans don’t require a downpayment and help home buyers purchase properties in suburban and rural areas.
USDA Mortgage Benefits:
– Extremely competitive mortgage rates
– Low mortgage insurance fees
– No limitations on loan amounts
– Eligibility of credit scores above 640
Jumbo loans fall under the non-conforming category and exceed limits set by the Federal Housing Finance Agency. Intended as loans for luxury and high-end homes, these have a specific set of requirements and typically offer financing in millions of dollars.
Benefits of Jumbo Loans:
– Competitive rates
– Access to loans for high priced luxury properties
– The option of adjustable or fixed-rate interest
– Possibility of low down payments
After comparing the loans available, speak with a home loan expert to find one tailored to your needs.