An FHA loan is insured by the Federal Housing Administration, a federal agency within the U.S. Department of Housing and Urban Development (HUD). The FHA does not loan money to borrowers, rather, it provides lenders protection through mortgage insurance (MIP) in case the borrower defaults on his or her loan obligations. Available to all buyers, FHA loan programs are designed to help creditworthy low-income and moderate-income families who do not meet requirements for conventional loans.
FHA loan programs are particularly beneficial to those buyers with less available cash. The rates on FHA loans are generally market rates, while down payment requirements are lower than for conventional loans.
FHA Loan Qualification Requirements
- Credit scores as low as 580 may qualify
- Refinance up to 97.75% of your primary home’s value
- Buy a home with as little as 3.5% down (primary home)
How an FHA Loan Works
- Your actual payment will vary based on your situation and the current interest rates when you apply
- Pay your mortgage at any time without pre-payment penalties
- 30-, 25-, 20- and 15-year terms are all available with fixed rates
- 5-year adjustable-rate mortgage available
VA guaranteed loans are made by lenders and guaranteed by the U.S. Department of Veteran Affairs (VA) to eligible veterans for the purchase of a home. The guaranty means the lender is protected against loss if you fail to repay the loan. In most cases, no down payment is required on a VA guaranteed loan and the borrower usually receives a lower interest rate than is ordinarily available with other loans.
VA Loan Features
- 30-, 20- & 15-year fixed-rate and 5-year ARM loans available
- Jumbo VA loans available up to $1,500,000
- Buy a home with no money down
- Refinance up to 120% of your primary home’s value
- VA Streamline refinance – available for veterans currently in VA loans – has reduced funding fees and minimal documentation
- No monthly PMI (Private Mortgage Insurance)
How VA Loans Work
- Credit scores as low as 620 may qualify for VA loans
- Prepay your mortgage at any time without penalties
Although mortgage insurance is not required, the VA charges a funding fee to issue a guarantee to a lender against borrower default on a mortgage. The fee may be paid in cash by the buyer or seller, or it may be financed in the loan amount.
A VA loan can be used to buy a home, build a home and even improve a home with energy-saving features such as solar or heating/cooling systems, water heaters, insulation, weather-stripping/caulking, storm windows/doors or other energy efficient improvements approved by the lender and VA.
Veterans can apply for a VA loan with any mortgage lender that participates in the VA home loan program. A Certificate of Eligibility from the VA must be presented to the lender to qualify for the loan.