If you are considering a home purchase, figuring out which loan type or product is right for you is key. Thus, in this article, we’ll go over several loans and their differences.
You may have more options than you think when it comes to securing a mortgage for your new home. While many buyers opt for conventional financing, another option or program might be a better choice for you, depending on your personal and financial situation.
Learning more about FHA, USDA, and VA loans ensures you get the best possible deal for your mortgage and that you secure the loan that you need for your new home. Here’s what you need to know about these useful mortgage options.
What Is The Difference Between VA, FHA, and USDA Loans?
There are various loan types and programs available for homebuyers these days. However, many people do not take the time to research and compare commonly chosen loan products. The good news here is that we have done the work for you.
These are traditional mortgages that are backed by the FHA: when you take out an FHA loan, this government agency is insuring the loan. This makes your loan more appealing to lenders who might otherwise feel your credit or income history is not strong enough.
An FHA loan is available to a wide range of buyers and price points and offers a low-down payment, reasonable interest, and other perks that make it worth exploring for your next mortgage.
Here, borrowers must have a satisfactory credit score to qualify for the 3.5 percent low down payment advantage, and the FHA-qualified home being purchased must be a primary residence. Additionally, an FHA mortgage often requires mortgage insurance. FHA loans require a property appraisal from an FHA-approved appraiser as well.
If you are a veteran, then this program (offers loans insured by the Department of Veteran Affairs) is a great option for you. VA loans typically do not require money down, so you can buy immediately, rather than saving for years for a down payment.
The VA loan is available to those who have served or are serving in the armed forces and is a good option to help you get the home you want with no money down, unlike a conventional mortgage loan.
In order to qualify, a borrower must have a satisfactory credit score, the home must be a primary residence, and the borrower must also have a Certificate of Eligibility. The Certificate of Eligibility (COE) proves that the applicant officially meets the minimum military service requirements.
One of the most useful and often overlooked loan programs is from the USDA. While this government office offers direct loans, far more people qualify for their insured loan programs. USDA loans are for rural areas, but a surprising number of suburban communities and locations qualify as well. With a low-down payment and interest, this subsidized loan program is well worth it if you plan to live in a rural or suburban area. Note, USDA loans require no down payment, unlike FHA and conventional loans.
Here, you can qualify for A USDA loan with a lower than average credit score and as long as your future home meets the following requirements:
- The house must be your primary home.
- The property cannot be a working farm.
- Your home appraisal must show the condition of the home meets USDA standards.
- The foundation and house need to be structurally sound.
- The property must be accessible from a paved or all-weather road.
Overall, the USDA monthly guarantee fee is lower than FHA monthly mortgage insurance in most cases, and you may be able to roll these fees into your loan. What’s more, you may be able to roll your closing costs into your loan. And if you already have a USDA loan, you can refinance it into a new USDA loan.
When Does One Loan Option Make More Sense Than The Others?
Not every borrower will qualify for the mortgage options above; the USDA has guidelines on income and the home you are interested in. The FHA does not have income requirements, but you will need to prove your income, and this option also has a loan limit. If you do meet the guidelines of any of the above programs, they can help you access the home you want by dramatically reducing your upfront and deposit costs.
Why Does Working With A Mortgage Professional Matter?
The right loan for you will depend on your income, credit, and the home you have selected. Moreover, your agent or mortgage loan professional can help you find the home that suits the program you want and make it easy for you to secure the financing you qualify for.
Thus, it is in your best interest to work with a local mortgage expert. That said, if you would like to know more about these specific home loan types or have questions about getting approved for a mortgage, then get in touch today to talk about your home buying options and see which loan option is right for you.
Ready to Apply For a Home?
Are you curious about mortgages, or are you ready to apply for one to buy a home? If so, Sammamish Mortgage can help. We are a local mortgage company from Bellevue, Washington, serving the entire state, as well as Oregon, Idaho, and Colorado. We offer many mortgage programs to buyers all over the Pacific Northwest and have been doing so since 1992. Contact us today with any questions you have about mortgages.