So you’re refinancing (awesome!) or buying a home (congrats! 🎉), and you know you need a mortgage.
Before you head to the bank or talk with a lender, you need to know the difference between a conventional, FHA, and VA loans.
Here’s a crash course:
- Definition: A conventional loan is a loan not insured by the government. This means there’s no guarantee for the lender if you fail to repay.
- Down payment: Because it’s not insured, a conventional loan requires a 20% down payment.
- Special considerations: Can’t do 20%? Then you’ll need to have private mortgage insurance (PMI). PMI picks up the tab for your lender if you happen to default on the home.
- Definition: A FHA loan is a loan insured by the Federal Housing Administration (FHA).
- Down payment: Because it’s insured, a lender can offer a downpayment as low as 3.5% of the purchase price.
- Special considerations: You’ll need a credit score of at least 580 with 3.5% down, and 500 with 10% down.
- Definition: A VA loan is a loan guaranteed by the Veterans Administration (VA). It is only available to current members of the U.S. armed forces, veterans, national guard or reserves, and surviving spouses.
- Down payment: There is no minimum down payment or PMI required for buyers purchasing a primary residence.
- Special considerations: Borrowers do pay an initial funding fee — a one-time charge between 1.25% and 3.3% of the loan amount.
If you have questions about real estate, shoot me a message. I’d love to listen and help in any way I can!