There are five different home loans options. Often after hearing this one of the first questions new clients ask is “which loan is best?” The better question is “what loan is best for me?”
The best loan for you is whichever of these five options you are best qualified for that suits your needs.
The following information is given in order for you to better understand the options. As you work with Dan and as he learns more about you he will be better able to determine which is best for you and your situation.
1. Conventional Loans
Conventional home loans are best for individuals able to put a minimum 5-10% down payment (20% to circumvent mortgage insurance), have better credit, and more stable income. These typically have the better interest rates and are 15 to 30 year fixed (the rate will not change over that time). Conventional loans are considered to be Conforming or Jumbo: Conforming loans are for loans under $546,250 and Jumbo is for any amount above that.
2. Federal Housing Administration Loans (FHA Loans)
FHA loans are for individuals who may not be able to put down a large percent of the price of the home, may have less than impressive credit, or who may have holes in employment history. Mortgage insurance is required and often a cosigner is also needed. This option is open to many who are unable to pursue a conventional loan.
3. Veteran Affairs Loans (VA Loans)
VA loans are for individuals who are currently are or who have served in the armed forces. This includes active duty members or veterans of the US Army, US Air Force, US Navy/Marines, and US Coast Guard as well as National Guard and Reserve members. Typically, there is no down payment needed, rates and terms are competitive but a funding fee is required.
4. US Department of Agricultural Loans (USDA Loans)
USDA loans are operated by the US Department of Agriculture’s Rural Development Program. The intent is to encourage development in rural areas. Loan amounts are typically under $400,000, usually nothing required for a down payment, and rates are lower than conventional loans but mortgage insurance is required and applicants must meet income and geographical restrictions.
5. Alternative Loans
Alternative loans, often called “out of the box loans,” are for individuals who don’t have significant documented income but who have other resources (such as sheltered income). These include competitive rates on loans that are at least $300,000.