FHA/VA/USDA MORTGAGES

What is the difference between a Conventional, FHA, USDA and VA Loan?

Conventional Loans

When you apply for a home loan, you can apply for a government-backed loan (such as an FHA or VA loan) or a conventional loan, which is not insured or guaranteed by the federal government. This means that, unlike federally insured loans, conventional loans carry no guarantees for the lender if you fail to repay the loan. For this reason, if you make less than a 20% down payment on the property, you’ll have to pay for private mortgage insurance (PMI) when you get a conventional loan. (If you default on the loan, the mortgage insurance company makes sure the lender is paid in full.) The fees for conventional loans typically have less cost to the borrowers.

FHA & USDA Loans

A FHA loan is a loan insured by the Federal Housing Administration (FHA). If you default on the loan and your house isn’t worth enough to fully repay the debt through a foreclosure sale, the FHA will compensate the lender for the loss. The PMI insurance is a large cost to the homeowner.

These loans are sometimes favorable to owners who have fewer funds to put as a down payment, closing cost and additional cost can be bundled into the loan. They are typically available to buyers with lower FICO scores allowing some buyers more flexibility in purchasing a home.

VA Loans

A VA loan is a loan guaranteed by the Veterans Administration (VA). This type of loan is only available to certain borrowers through VA-approved lenders. (The guarantee means that the lender is protected against loss if the borrower fails to repay the loan.)

To qualify for a VA loan, you must be a current member of the U.S armed forces, a veteran, a reservist/national guard member, or an eligible spouse.