Which Government Backed Home Loan Is Best Suited For Purchasing My New Home?
If you want a loan with a No Money Down Option then you must be a veteran or you must purchase a home in a HUD Approved Area for Rural Housing. The VA and USDA Loan are the only type loans that offer the No Down Payment Option for buying a home.
The FHA loan is the most popular type loan at this time because the down payment requirement is only 3.5% compared to the Conventional Loans which require 5% down. Both require the added cost of Mortgage Insurance any time less than 20% down is used.
The VA and USDA Loans do not require mortgage Insurance but have a funding fee that is financed into the loan. The USDA funding fee is currently 3.5% but expected to rise with the growing number of defaults. The VA funding fee varies and is determined by the veterans DD214 and Certificate of Eligibility.
Here is a snap shot of the type client that may choose one of these loan types.
VA Loan - An active member or a former member of the armed forces.
USDA Loan - A person living in or wanting to buy a property that resides in an area that typically has under 10,000 other residents.
Conventional Loan - A person with clean credit and 5% or more saved for the down payment of their new home.
FHA Loan - A person with past credit issues that have been resolved in the last year who does not have any money saved for a down payment but who has a relative that will give them the money to put down and/or co-sign on the loan for them.
The Interest Rates on all of the above mentioned loan types are at their lowest levels in the past 100 years. Some are opting for the 5 year arm which is fixed at 3% for the first 5 years of the 30 year loan term. Many of whom plan to refinance or sell the property within the next 5 years.
Senior Home Loan Originator Jim Poole
Senior Loan Officer NMLS #351358