Did You Know?

FHA loans are one of the best options for young, first-time home buyers who have not had as much time to save for a large down payment or establish a high credit score.

Get an FHA Refinance Loan
Get an FHA Purchase Loan
FHALoan.com
Get an FHA Refinance Loan
Get an FHA Purchase Loan
Click to Start Your Refinance or Purchase Loan

Let's Compare FHA Loans to VA, USDA, and Conventional Mortgages


Let's Compare FHA Loans to VA, USDA, and Conventional Mortgages
Buying a home is complicated. Financing it, even more so! With so much information coming at you from different places, it can become overwhelming. However, it is incredibly important for you to stay informed, and know what your options are. So, start with the basics. Read about the four different mortgage types available before approaching a lender, so you have a better idea of what to look for. 

 FHA Loans 

FHA mortgages are backed by the U.S. Federal Housing Administration, a government agency established by HUD to promote equal opportunity housing opportunities for Americans. Borrowers can apply for FHA loans through lenders who are approved to provide them by the FHA. FHA loan programs are a particularly good choice for first-time homebuyers because they are designed with them in mind. The FHA has easier-to-meet standards for borrowers, such as a minimum credit score of 580, a smaller down payment requirement of 3.5%, and a debt-to-income ratio of 43% or less. Since the FHA backs these loans and protects lenders from losses, the lenders find it easier to grant loans to higher-risk borrowers. 

VA Loans 

VA home loans are great options for active or retired members of the U.S. military, and even for certain qualifying relatives. VA loans are backed by the Department of Veterans Affairs and have many similar features as FHA loans, namely, less stringent eligibility requirements. However, unlike FHA loans, the VA requires NO down payment for VA loans. This makes VA loans especially appealing to first-time homebuyers. About 90% of VA loan borrowers don't put down any money when financing their home. 

USDA Mortgages 

USDA loans are a lot like the VA and FHA loan programs, but these are backed by the United States Department of Agriculture. These mortgages were established to help make homeownership more affordable in qualifying, rural areas. Unlike the FHA, the USDA sets income limits that borrowers must fall under to qualify for a USDA loan. This limit is typically under 115% of the area median income, which limits the applications to low- and moderate-income families. 

Conventional Mortgage  

Simply put, conventional loans are mortgages that are not insured by the government, which also means that there are no additional qualification requirements set by any agency outside the lender.   

Since conventional loans are not insured by a government agency like the FHA, VA, or USDA, it comes with more risk for lenders. If a borrower defaults on their mortgage, the lender stands to lose out on those payments and interest. That is why conventional loans come with higher qualifying requirements that borrowers must satisfy. Homebuyers with low credit scores who are accepted for government-backed loans may not qualify for conventional loans, since lenders need to be more certain that the borrower can repay the loan. Most conventional loans have a minimum credit score of 620, and a minimum down payment of 5% with private mortgage insurance. Given all these hurdles, keep in mind that conventional loans usually offer comparatively lower interest rates. 

You should always talk to an experienced loan officer to see what the best loan type is to suit your needs, but it helps to do your own homework. If you approach a lender already having an idea of what you are looking for, it shows that you are prepared.  

------------------------------

RELATED VIDEOS:
Homebuyers Benefit From the Work Done by Fannie Mae
HUD 4000.1 is Sometimes Called the FHA Handbook
Credit History Is Presented as Your FICO Score
See Your Credit Scores From All 3 Bureaus
See Your Credit Scores From All 3 Bureaus

FHA Loan Articles

What to Do About High Interest Rates?

Mortgage rates are hitting prospective homeowners hard this year and are approaching 8%, a rate that didn't seem very likely last winter. With so many people priced out of the market by the combination of high rates and a dwindling supply of homes.

What to Know About the FHA Handbook

The FHA Handbook serves as a crucial resource for mortgage lenders, appraisers, underwriters, and other professionals involved in the origination and servicing of FHA-insured home loans. It outlines the policies and requirements for FHA-insured mortgages.

Some Important Points About FHA Rehab Loans

FHA rehab loans are a specialized type of mortgage loan offered by the Federal Housing Administration that allows borrowers to finance both the purchase or refinance of a home and the cost of needed repairs.

Important FHA Loan Terminology

Borrowers considering an FHA loan should be familiar with some basic loan terminology. These loans are popular among first-time homebuyers and those with lower credit scores because they often offer more flexible eligibility requirements and lower down payment options.

Similarities and Differences Between Co-Borrowers and Cosigners

You may have heard the terms co-borrower and cosigner in connection with your FHA loan process, but aren't sure about the distinction. Both a co-borrower and a cosigner can help a primary borrower qualify for a mortgage, but they have different roles and responsibilities.

FHALoan.com is not a government agency. We do not offer or have any affiliation with loan modification, foreclosure prevention, payday loan, or short term loan services. Neither FHALoan.com nor its advertisers charge a fee or require anything other than a submission of qualifying information for comparison shopping ads. We do not ask users to surrender or transfer title. We do not ask users to bypass their lender. We encourage users to contact their lawyers, credit counselors, lenders, and housing counselors.

SecureRights Advertiser Contact Information