Which mortgage loan is right for you, and why?

FHA? USDA? VA? TXVLB? What the HECK? With so many acronyms surrounding home mortgage programs, and their mountains of new regulations, choosing the best mortgage for you can be extremely confusing. Now more than ever it is imperative for consumers to know the various types of mortgage loans so they can make an educated choice. Below is a simple, yet comprehensive, breakdown to help you.
 
 

Typically, the 3 most consumer-friendly loan
programs are FHA, VA and USDA. This is due to their lower down payment requirements and more lenient credit underwriting guidelines.

Each of these loan programs has various benefits as well as certain eligibility requirements. We'll explore them below. Warning:The overview may be a little lengthy but the information is valuable. Read completely or return as time permits. Additionally, this information is not a substitute for talking directly with a mortgage expert. Call us immediately if you have any questions or concerns.

LOAN AMOUNT COMPARISONS
  FHA VA USDA
Base Loan Amount* $241,250 $250,000 $250,000
Financed Fees¹ $2,412 $5,375 $9,067
Total Loan Amounts $243,662 $255,375 $259,067
Down Payment $8,443 $0 $0

 

MONTHLY PAYMENT COMPARISONS
  FHA VA USDA
Principal and Interest (5%, or ??% APR) $1,308 $1,371 $1,391
Estimated Monthly Mortgage Insurance $230² $0 $0
Total Monthly Payment³ $1,574 $1,371 $1,391

Assumptions:
¹ 1% FHA Upfront Mortgage Insurance Premium, 2.15% VA Funding Fee, or 3.5% USDA Rural Development Fee
² At 1.15%
³ No property taxes or hazard insurance included in monthly payment
*Based on sales price of $250,000
Credit Scores allow for maximum financing


Benefits of VA

  • 0% Down Payment Possible (except for higher loan amounts per VA guidelines)
  • Seller can help pay off debt to qualify (Up to 4%)
  • 100% Gift Funds OK for Down payment or Closing Cost
  • Certain Mortgage Closing Costs NOT ALLOWED to be paid by Veteran
  • 2.15% interest rate available for 1st time use with minimum down payment
    • Click here to download full details from VA's website

VA Requirements

  • Must be a Qualified/Eligible Veteran which is defined by one (1) of the following:
    • Served 181 days during peacetime (Active Duty).
    • Served 90 days during war time (Active Duty).
    • Served 6 years in the Reserves or National Guard.
    • A spouse of a service member who was killed in the line of duty
  • Property must be Owner Occupied/Primary Residence.
  • VA Funding Fee is charged to Veteran and Can be Financed
  • Property must meet VA Minimum requirements & Pest/Termite Inspection required

Benefits of FHA

  • Minimal Down Payment 3.5% with Minimum Credit Score 580**
  • Seller can pay up to 6% of closing costs (Not to exceed actual costs)
  • Lower Credit Score Requirements**
  • More lenient credit underwriting**
  • FHA 203k program allows for substantial rehabilitation to the home be included in the mortgage loan

FHA Requirements

  • Minimum Credit Scores required 500 requires 10% Down Payment **
  • Property must be Owner occupied/Primary Residence
  • Property must meet HUD Minimum Property Requirements

Benefits of USDA

  • 0% Down Payment Possible
  • 100% Gift Funds OK for Down payment or Closing Costs.
  • Low monthly Mortgage Insurance
  • No cash reserve requirement

USDA Requirements

One final note: FHA, VA, and USDA have guidelines separate from various investors. Some investors may have higher credit score requirements and/or credit criteria. As a borrower, you should evaluate all of your mortgage options to make the best decision for you and your family. Ask your Service First Mortgage - The Davidson Group mortgage expert for guidance and recommendations based on your specific situation.