What Type of Loan is Best For Me?
When purchasing a home, there are several financing options available. Your mortgage lender will work with you to see which type of loan best suits your budget and needs, but here is a short overview of the options:
VA Loan: As a way to thank our veterans and active military members for their service, these brave folks are eligible for a Veterans Affairs home loan. Benefits of a VA loan include no down payment, more lenient loan requirements, no mortgage insurance, and limited closing costs. For more details, please visit http://www.realtor.com/advice/finance/va-loan-benefits/?guide_ref=223057
Conventional Loan: A conventional loan is not insured or guaranteed by the government, but is backed by private lenders. It’s insurance is usually paid by the borrower. They are the most popular type of mortgage loan by far. Benefits of a conventional loan include low interest rates, fast loan processing, diverse down payments starting as low as 3% of the sale price, various term lengths on a fixed rate mortgage, reduced private mortgage insurance (PMI). For more information on qualifying for a conventional mortgage and for current rates, please visit http://www.forbes.com/advisor/mortgages/conventional-mortgage/
FHA Loan: With an FHA loan, the Federal Housing Administration, which is part of HUD, insures the loan, so your lender can often get you a better deal. Benefits include low down payment, low closing costs, and easy qualifying credit. This type of loan is designed for lower to moderate income borrowers; they require a lower down payment and lower minimum credit score than many conventional loans. While an FHA loan has these benefits and others, it’s also important to note that they do carry other stringent requirements. Not all homes qualify for an FHA loan.
Another great reference to explain the different types of mortgage loans is financial expert Dave Ramsey: http://www.daveramsey.com/blog/types-of-mortgages
Once you are ready to take the first step into buying a new home, it is time to talk to a lender to really discuss all of your options. I work with a few excellent, professional lenders on a regular basis, and am happy to help you find someone who will be a great fit and answer all of your questions. Give me a call or send me an email for more information!