Types of Loans
Conventional – These are the most common type of home mortgages for the general public. Unlike an FHA or a VA loan, conventional loans are not backed by the government. Credit requirements and financial standards for conventional loans tend to be more limited. However, those with excellent credit and stable assets can often get great rates and terms.
USDA – If you’re looking to buy a home in a non-urban area of the U.S., you may qualify for a zero-down loan backed by the U.S. Department of Agriculture. USDA home loans allow buyers to secure these mortgages as long as the property is within a qualified area. If you qualify as low- to moderate-income and can’t qualify for VA loan, consider a USDA loan instead.
VA Loan – Most veterans are eligible for a VA home loan provided by private lenders but backed by the U.S. Department of Veterans Affairs. A mortgage that requires $0 down, VA loans are a competitive and affordable way for veterans laying down roots to save. VA loans are perfect for veteran first-time homebuyers who do not have enough money for a down payment. Credit requirements are looser than traditional mortgages and a bonus for those who don’t have a long credit history. Further, VA loans don’t require private mortgage insurance (PMI) – a typical insurance form for those who can’t put down 20 percent.
FHA Loan – Like VA loans, an FHA loan allows veterans to buy a home without the need for great credit and large down payment. FHA loans are especially geared toward first-time homebuyers. While FHA loans have some cost-saving advantages, they usually can’t match those of a VA loan. However, if your credit score is in the 500s, you likely won’t qualify for a VA loan. In this case, an FHA loan is a great option.