A conventional loan is a traditional mortgage. It is not associated with any government agency such as the Federal Housing Authority (FHA) or Veteran's Administration (VA). It generally requires at least 5% down (though it can be as low as 3% for some buyers), but private mortgage insurance (PMI) is required for down payments of less than 20%. Paying PMI will add to the cost of your monthly payments.
Because FHA loans are insured by the Federal Housing Administration (FHA), it’s easier to qualify for them. That makes them attractive to first-time buyers, borrowers with low to moderate incomes, and buyers with lower credit scores or higher debt-to-income ratios. FHA loans also tend to have lower down payments (as low as 3.5%), lower monthly insurance premiums, and often lower closing costs.
Easier requirements for income and credit score
Minimum down payment: 3.5%
Mortgage Insurance Premium may be less costly than PMI
Lower closing costs
MIP required
Buy, build, or refinance houses, approved condos, modular homes, and manufactured homes with pre-approval
Offered as a benefit to active and retired U.S. military personnel, VA loans are guaranteed by the U.S. Department of Veteran Affairs. Like FHA loans, they are easier to qualify for (if you are an eligible veteran) and have lower costs and more liberal terms.
Easier requirements for income and credit score
No down payment
Lower closing costs
Interest rates may be negotiable
Must be an eligible veteran or unmarried surviving spouse of a veteran who died on active duty or as the result of a service-connected disability
VA Funding Fee may be required
Guaranteed by the United States Department of Agriculture (USDA), these loans offer an affordable way to purchase property in rural neighborhoods. These are non-urban areas, but often include villages or small towns near bigger cities. The loan term is a 30-year fixed-rate mortgage.
No down payment
Allows for non-traditional credit
Lower closing costs, with no limit on contributions from seller or gift money
Must meet USDA location standards
USDA Guarantee Fee is required
Insured by the Federal Housing Administration (FHA), the 203(k) allows you to buy a home and get the necessary funds to remodel it, all with one loan. You can choose between two options:
The Standard 203(k) covers repairs of more than $35,000, with a minimum repair cost of $5,000. Allowable improvements include structural alterations and reconstruction, major landscaping, and site improvement.
The Limited 203(k) is designed for repairs costing less than $35,000. You can borrow funds to replace
Low 3.5% down payment
Borrow up to 96.5% of projected value after improvements are done
Mortgage Insurance Premium (MIP) required (can be rolled into loan)
This loan is designed for buyers who want to buy a home and fix it
Minimum 5% down payment (10% down for second homes)
Gift funds can be used for a portion of
PMI required for down payment under 20%
