Las Vegas Real Estate News

FHA, VA, or Conventional - Understanding Loan Options

There are a lot of options out there for mortgages. The three that you hear most about are FHA, VA, and conventional mortgages. This brief guide will tell you a bit about each and how they compare.

Conventional Mortgage - A conventional mortgage is the one the bank gives you. While the bank has credit rating restrictions, etc, there are no restrictions as to the quality of the house, the value of the house to the loan, and so on. The bank is free to choose what restrictions they want to apply, but there are no outside rules. These are the majority of all home loans. They're easy to get almost anywhere if you have a decent down payment and good credit.

Of course, there are rules about the health of the house and dangers that are governed by local and state laws.

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FHA - The Federal Housing Administration insures loans for people who might not be able to afford a conventional loan, have low credit scores, or need a low down payment to be able to get into a home. The home must meet certain criteria including the health and value of the house.

An FHA loan is much less expensive to get into. Their loans have a 1.75% premium that is paid at closing. There is also a monthly premium that pays for the mortgage insurance on the loan.

This a great loan for someone with a low down payment and/or low credit score. The premium can be expensive, but it helps you get the loan. When you're ready, you may be able to refinance to lose the premium.

VA - The Veterans Administration offers loans to those that have served in the US military and their spouses.

These loans have a funding fee that ranges from 1.25% to 3.3% of the loan amount. The VA doesn't always finance the whole loan, so there may be other fees from the bank. The VA guarantee amount varies by county, so it's worth checking so you know how much house they might cover in your county.

Read our previous blog about closing costs for VA loans: Closing Costs for VA Loans

Choosing the right loan for your needs is a matter of knowing how much money you have to put down, how much you can afford each month, and your credit rating. A mortgage broker can help guide you to the right loan.

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