Trying to decide which home loan option is best for you?

Learn about the 4 main loan types, FHA, USDA, VA and Conventional- and weigh the pros and cons to each so that you can decide which would best suit you. 

FHA Loans

A low down payment and a credit score of only 580 make this loan type attractive to those without perfect credit. The mortgage insurance tends to be a little higher than other loan types, and lasts the duration of the loan.

The Pros

• As little as 3.5% down payment.
• Will accept as low as 580 credit scores.
• Allows higher debt to income ratios than conventional.
• More forgiving of foreclosure and bankruptcy.

The Cons

• Mortgage insurance is higher than on other loans.
• Mortgage insurance lasts the life of the loan.

Conventional Loans

The Pros

• Greatest flexibility of mortgage loan types.
• Faster processing than government loans.
• Less fees than government loans.
• Mortgage insurance may not be required.

The Cons

• Need more cash down payment.
• Need higher credit scores.

USDA Loans

This loan provides 100% financing and is backed by the US Department of Agriculture, but the home must be in a USDA designated rural area. USDA tends to have lower fees, as well, but has income limits. Your approved lender can give you better details of the qualifications.

The Pros

• 100% financing available so no cash required.

The Cons

• Homes must be in designated rural areas.
• Income must be below certain levels.
• Must have mortgage insurance.

VA Loans

This loan provides 100% financing and is backed by the Veteran's Association, but the borrower must have VA eligibility earned through US military service. If you aren't sure of your eligibility status, your approved lender can help.

The Pros

• 100% financing available so no cash required.
• No private mortgage insurance.
• Higher debt to income ratios than conventional.
• More forgiving of foreclosure and bankruptcy.

The Cons

• Only available to Veterans.
• Have to pay a VA loan funding fee.

Now that you know more about the 4 main loan types and the pros and cons to consider with each, we hope that this will help you decide which is right for you. We encourage you to shop lenders and meet with one as early on in the buying process as possible. This will ensure you know your options and that you have the time necessary to make the best investment decision possible!