Who should consider an FHA-insured loan?

According to the FHA's Web site, FHA-backed loans are especially attractive for first-time homebuyers who fit certain criteria.

Buyers attracted to FHA-backed loans:

• Have a little cash for a down payment and closing cost.
• Have imperfect credit.
• Want to keep their monthly payments as low as possible.
• Are concerned that they may not be able to qualify for a loan.
• Are concern about the possibility of monthly payment increase.

What are the advantages of FHA-insured loans?

• Competitive interest rates.
• Smaller down payment required as a percentage of the purchase price.
• A gift from a family member, employer or charitable organization can be put toward the down payment.
• Minimum credit score not required, though some lenders expect a score of at least 580.
• Lender can consider payment of utility bills, rent, auto insurance premiums and other items if the borrower doesn't have an established credit history.

What are Conventional Loans and Conforming Loans?

By definition, a Conventional Home Mortgage Loan is any mortgage that is not guaranteed or insured by the federal government. A conventional loan is generally referring to a mortgage loan that follows the guidelines of government sponsored enterprises (GSE's) like Fannie Mae or Freddie Mac. 

What are the advantages of Conventional Loans versus other types of loans?

Conventional Mortgage Loans are Ideal for Borrowers with Excellent Credit and a Substantial Down Payment.

Conventional Loans Can Usually be Obtained With Less Hassle
Conventional mortgages generally have fewer underwriting hurdles than FHA, VA or USDA Loans, which can take longer to process because of the extra guidelines and procedures.

Conventional Mortgages Can Build Equity Faster
Because Conventional Loans usually require a higher down payment (usually 5% - 20%) than the other loan types, home equity can build quicker.

What to know about VA loans?

VA guaranteed loans are made by lenders and guaranteed by the U.S. Department of Veteran Affairs (VA) to eligible veterans for the purchase of a home. The guaranty means the lender is protected against loss if you fail to repay the loan. In most cases, no down payment is required on a VA guaranteed loan and the borrower usually receives a lower interest rate than is ordinarily available with other loans.

Other benefits of a VA loan include:

• Negotiable interest rate.
• Closing costs comparable – and sometimes lower - than other financing types.
• No private mortgage insurance requirement.
• Right to prepay loan without penalties
• Mortgage can be taken over (or “assumed”) by the buyer when a home is sold.
• Counseling and assistance available to veteran borrowers having financial difficulty or facing default on their loan.

What to know about USDA loans?

Sometimes good credit and a steady income are not enough to qualify for a home loan at a commercial lending institution, such as a bank, savings and loan or mortgage company.

More rural families and individuals may be eligible to become homeowners with the help of a USDA guaranteed home loan. When the federal government agrees to guarantee a loan, lending institutions can help buyers while incurring less risk. Through USDA’s Guaranteed Rural Housing Loan Program, low- and moderate-income people can qualify for mortgages even without a down payment.