Are you looking into buying a home but you don't know the differences between all the types of loans out there? If so, it will help to have a breakdown of the following types of loans.
An FHA loan is from the Federal Housing Administration and is a good option for first-time homebuyers. It doesn't require a large down payment or a great credit score in order to be approved, which makes home buying accessible to many homeowners. Be aware that an FHA loan does charge private mortgage insurance in addition to the monthly loan's principal and interest because this loan is riskier than other loans due to the more relaxed qualifications. The insurance is also charged over the lifetime of the loan and does not go away after you've paid off 20% of the home.
The U.S. The Department of Agriculture provides loans that require no down payment, which makes it one of the few mortgage products that can provide you with 100% of the home's value. If you do not have the cash on hand for the down payment but you have the income that allows you to make monthly payments, this could be the loan for you. USDA loans do have their own type of insurance, but it works a bit differently. Insurance is paid in the form of an annual fee that is reduced each year that you own the home. Eventually, the insurance will be very little and end up going away by the time the home is paid off.
VA loans are from the Veterans Administration and are designed for families with family members with current or past duty in the armed forced. The loan has its own advantages, such as not requiring any down payment to purchase the home, but it has its own unique fees that are paid at closing to the Veterans Administration. VA loans will also have lower credit requirements and low interest rates, given extra incentive to veterans to take advantage of the program.
A conventional loan is one that you would secure through a local mortgage lender in your area, such as your bank. It has a bigger down payment requirement than other loans and offers competitive interest rates since the lender is competing for the business of many potential home buyers. PMI must be paid for borrowers that are paying less than 20% of the home's value as a down payment, but that PMI can be removed once the 20% home value has been reached.
To learn more about mortgages, contact a lender.Share