What are my basic home loan options?

Conventional loans are for first time homebuyers to investors. Minimum down payment requirements vary, but a down payment as little as 3% can get you into a conventional loan on a primary residence. Mortgage insurance is required for loans that are above 80% Loan-to-value (LTV). There are also options with mortgage insurance with a conventional loan.

FHA stand for Federal Housing Administration. These loans are common with first time homebuyers. They allow a more affordable option for those with lower credit scores or higher debt-to-income (DTI) ratios. FHA loans require a minimum of 3.5% down. There is an “Up Front Mortgage Insurance Premium” (UFMIP) that is collected at settlement, but this is most commonly financed into the loan amount. There is also monthly Mortgage Insurance (MI) and it is usually paid until the end of the loan. For this reason, many borrowers try to refinance into a conventional loan when their credit scores and finances allow. Refinancing is NOT a guarantee as there are several factors that determine if refinancing makes sense. 

USDA stand for “United States Department of Agriculture”. USDA offers 100% financing to those who qualify in specific areas deemed rural. Mortgage insurance is required for the life of the loan, but the amount required is reduced anually, depending on your loan amount. This is an afforadable option for those who don’t have much or anything to put down and who are willing to purchase a home in a rural area. Check out the link to this Property Eligibility Tool to determine if the property you want to purchase is eligible for USDA. Income limits based on your household size also apply.