Government-backed loans
VA loans
With a VA loan, you can purchase the home of your dreams with zero down payment requirement and no mortgage insurance. However, VA loans have some specific rules and conditions you must understand, and you must check your eligibility with the US Department of Veterans Affairs.
One of the most significant advantages of VA loans is that they require no down payment. This means you can purchase a home with little to no savings.
VA loans can have lower interest rates compared to conventional loans.
Another way you can save money with a VA loan is by not paying for mortgage insurance. Typically, borrowers putting down less than 20% of the home’s purchase price will need to pay mortgage insurance. However, with a VA loan, the VA guarantees a portion of the loan, so lenders don’t require mortgage insurance.
VA loans also have lower closing costs than traditional loans.
Lastly, with a VA loan, you can use a streamline refinance, also known as an IRRL (Interest Rate Reduction Loan), to reduce your interest rate should rates drop to save money on your monthly mortgage payments or switch to a fixed-rate mortgage from an adjustable loan without going through an extensive credit check or property appraisal.
FHA loans
With an FHA loan, you can buy a home with a down payment as little as 3.5% of the sales price of the home. Many borrowers have found FHA loans to be a better option than a conventional loan due to more flexible qualifying guidelines. FHA loans are a great way to build credit and equity simultaneously. They are an excellent option for first-time homebuyers because they provide an easier path to homeownership.
- Easier Credit qualifications
- Minimum Credit Score 580.
- Down Payment 3.5% of the sales price
- Higher Debt to income ratio flexibility.
- Cash out refinance up to 80% of home value.
- Rate and term refinance available up to 97.75% of
USDA loans
USDA/RD are loans guaranteed by the United States Department of Agriculture. This guarantee enables lenders to provide borrowers with low to moderate-income mortgages without a down payment and lower interest rates. USDA runs this program to encourage homeownership and economic development in rural and some suburban areas.
Sometimes good credit and a steady income are not enough to qualify for a home loan at a commercial lending institution, such as a bank or a savings and loan. More rural families and individuals may be eligible to become homeowners with the help of a USDA-guaranteed home loan. If your home is in an eligible area, a USDA guaranteed loan is worth exploring.
USDA/RD program highlights:
- Property must qualify for rural housing eligibility status
- Seller contributions allowed
- No reserve requirement
- Not required to be a first-time homebuyer
- 580 minimum FICO credit score
- Many locations are eligible
- Mortgage Insurance is required and can be financed
- Low & no down payment options for qualified buyers
- Income limits apply
- Loan amount may include closing costs
- Government-backed
- Fixed rates
- Loan limits determined by applicant’s income
- In-house underwriting
