Conventional Loan The most common mortgage. Down payments can be as low as 3% and fees minimal, but requirements are fairly strict. Recommended for borrowers with good credit and stable income. FHA Loan A loan insured by the US Federal Housing Administration (FHA) to help open up homeownership to more people. Credit requirements are more lenient, and down payments are as low as 3.5%. VA Loan A loan insured by the US Department of Veterans Affairs (VA). Qualifying service members, former service members, or their families may be eligible for a VA loan with no down payment. USDA Loan A loan insured by the US Department of Agriculture (USDA) for homes in suburban or rural areas. Mortgage insurance is lower, and no-down-payment terms may be available. Other Loan Types to Be Aware of: Fixed-Rate Mortgage. A loan with the same interest rate and payment over the entire life of the loan. Most of the above loans are fixed-rate by default. Adjustable-Rate Mortgage (ARM). These have a low starting interest rate for a period of five, seven, or ten years, after which the interest rate fluctuates with prevailing market interest rates. This can cause dramatic increases in your monthly payment. Jumbo Loan. A “jumbo loan” is a loan for a higher balance than allowed by “conforming” standards (i.e. Fannie Mae and Freddie Mac). You may need this kind of loan if you want to buy an expensive home. Approval requirements are strict, and large down payments are usually required – at least 10-20%.
7 · 2024 Buyer Guide
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