Mortgage Types Explained

Conventional Loans

What They Are

Loans not backed by a government agency. They follow guidelines set by Fannie Mae and Freddie Mac.

Key Features

• Down payment: 3-20% (PMI required if under 20%)
• Credit score: Typically 620+, better rates with 740+
• Best for: Buyers with good credit and stable income

Pros

• No upfront funding fees
• PMI can be removed once you reach 20% equity
• More flexible on property types

Cons

• Higher credit requirements
• PMI required with less than 20% down

FHA Loans

What They Are

Loans insured by the Federal Housing Administration. Designed to help buyers with lower credit or smaller down payments.

Key Features

• Down payment: 3.5%
• Credit score: 580+ for 3.5% down, 500-579 for 10% down
• Upfront and annual mortgage insurance required

Pros

• Lower credit requirements
• Lower down payment
• More flexible on debt-to-income ratios

Cons

• Mortgage insurance for the life of the loan (unless refinanced)
• Property must meet FHA condition requirements

VA Loans

What They Are

Loans guaranteed by the Department of Veterans Affairs for eligible veterans and service members.

Key Features

• Down payment: 0% required
• No PMI
• VA funding fee (unless exempt)
• Property must meet VA minimum property requirements

Pros

• No down payment required
• No PMI
• Competitive interest rates
• Limited closing costs

Cons

• VA funding fee (unless exempt)
• Stricter property requirements
• Only for eligible veterans/service members

USDA Loans

What They Are

Loans backed by the U.S. Department of Agriculture for properties in eligible rural areas.

Key Features

• Down payment: 0% required
• Income limits apply
• Property must be in USDA-eligible area

Pros

• No down payment required
• Lower mortgage insurance than FHA
• Competitive rates

Cons

• Location restrictions
• Income limits
• Upfront and annual guarantee fees

Choosing the Right Loan

The best loan depends on:

• Your credit score
• Available down payment
• Military service status
• Property location
• Your income

A good lender will help you compare options for your specific situation.

Questions?

Reach out and I can help connect you with lenders who can review your options.