Let’s talk loan types!

Now that you’ve determined how much can afford for a home, it’s time to consider which of main loan types is right for you. Each loan type has pros and cons, along with variable credit score requirements.

Conventional loans - This standard loan is the most common loan type. They are also the most flexible and least restrictive.  Depending on your credit score and income you can put as little as 3% down, however most lenders will require 10%. Private Mortgage Insurance is not required when putting down 20% or more. Generally, a credit score of 620 or better is required.

FHA loans - A great option for those with lower credit scores, an FHA loan can be obtained with 580 credit score and as little as 3.5% down. However, this will require PMI for the life of the loan (typically rolled into the payment), and an Upfront Funding Fee of 2.25%. Because of the low down payment and credit score requirements, this is a great option for first time home buyers.

VA loans - Created exclusively for those who served, these loans are backed by the Department of Veteran Affairs and require no down payment and no PMI. Funding fee is required, usually rolled in payment. Lenders may have additional requirements.

USDA loans - This loan sounds like a farm loan but in reality is anything but! Designed to  to make homeownership a reality for low to moderate income families,  these loans are  available for people living in “rural” areas, which, according to the USDA, includes 97% of the territory in the US. If you’re not directly downtown in a big city, this loan could be for you. Requirements include:

Verified income eligibility  determined by state 
Permanent occupation of the dwelling
US Citizenship
Demonstrate willingnes to meet the loan obligation
Credit score of 640

This loan type also requires an Upfront Funding Fee (1%) and annual fee of .35% rolled into your payment.

Jumbo - If you're moving up to a bigger home or shopping a high cost area, this may be the loan for you. This type of loan can also be used to finance vacation and investment properties. Consider a Jumbp loand for properties up to $2 million! Minimum 660 credit score required; 15- and 30year loan terms available

Any of the non-conventional loans can help you save thousands on your overall costs, so be sure to take a look before moving forward with a conventional loan.

Ed Justen -DRE: 02221512  - Affiliated with  Keller Williams. All advice and information given on this blog is sourced from publicly available websites and common knowledge.  Got questions?  Click here to book 30-minute meeting with me.