Government-Insured
Loans
Federal Housing Administration Loan (FHA)
Unlike conventional loans, A FHA loan does not require Private Mortgage Insurance (PMI), since it’s insured by the government.
These types of home loans help make homeownership possible for borrowers who don’t have a large down payment saved up or don’t have excellent credit. Borrowers need a minimum FICO score of 580 to get the FHA maximum of 96.5 percent financing with a 3.5 percent down payment; however, a score of 500 is accepted if you put at least 10 percent down.
FHA loans require two mortgage insurance premiums: one is paid upfront, and the other is paid annually for the life of the loan if you put less than 10 percent down, which can increase the overall cost of your mortgage.
Terms from 15 -30 years are available as is 5-year adjustable rate. FHA mortgages can be paid off early without pre-payment penalities.
Veteran Affairs Loan (VA)
A VA loan is a mortgage loan issued by VA-approved lenders and guaranteed by The United States Department of Veteran Affairs. VA loans allow for relaxed credit requirements and down payment options (including no down payment) for those who are currently serving or have served our country.
VA loan may be used to purchase a home or refinance an existing VA loan through the VA IRRRL and cash-out options. A VA loan offers better credit requirements similar to FHA, however, unlike FHA they allow for 100% financing options.
Income Requirements: VA loans have a unique income qualifying guideline referred to as “residual income.” This is the amount of money left over from all the borrower’s gross monthly paychecks after the mortgage, property taxes, insurance, federal/state withholdings, and qualifying installment and revolving debt are taken out.
US Department of Agriculture Loan (USDA)
The Section 502 Guaranteed Loan Program assists approved lenders in providing low and moderate-income households the opportunity to own a home as their primary residence in eligible rural areas. Eligible applicants may purchase, build, rehabilitate, improve or relocate a dwelling in an eligible rural area with 100% financing. No money down for those who qualify.
To qualify, a borrower’s income cannot exceed 115% of the median household income.
For a property to qualify for a USDA home loan, it has to be deemed eligible by the USDA. Check if a property is eligible HERE.
