Different Types of Real Estate Home Loans, FHA, VA, USDA and Conventional Loans: Which One is Right for You?

FHA, VA, USDA, Conventional LoansSince purchasing a home is usually the largest financial purchase a person makes, the majority of buyers require a loan from a lender to purchase a new home. Understanding the difference between the types of loans out there, such as FHA, VA, USDA and conventional loans, can help you decide which loan program is right for you. Each one has different requirements such as maximum loan amount, amount of down payment required and credit requirements.

FHA Loans

  • The Federal Housing Administration (FHA) insures loans made by private lenders (banks or mortgage companies) to eligible buyers. The government insures the loan against default.
  • The FHA loan limit in Maricopa is $271,050.
  • FHA allows a down payment of just 3.5% and it may consist entirely from gift funds.
  • In addition to the low down payment, FHA offers low closing costs and easy credit qualifying.
  • Monthly mortgage insurance and 1.75% upfront Mortgage Insurance Premium.
  • Less than perfect credit is OK.
  • There are several FHA programs. One FHA program helps buyers who experienced a recent short sale, foreclosure or bankruptcy through their Back to Work loan program. Another allows you to buy a home and include the costs of fixing it up into one loan.

VA Loans

  • VA loans are a no money down program available to eligible American veterans or their surviving spouses.
  • Guaranteed by the US Department of Veteran Affairs (VA), the VA does not lend the money, it backs loans made by private lenders to veterans.
  • The VA loan limit in Maricopa is $417,000.
  • There are VA Jumbo loans available above $417,000, however there is a down payment required.
  • VA loans are great for buyers with limited income, no cash reserves and average to lower credit scores.

USDA Loans  

Please Note:  Update:  USDA loans are still available, however the area of eligibility has changed.  Most of Buckeye is no longer included in the eligible area.  Visit the USDA site to see the eligibility map for Arizona.  You can also type in an address to see if the property is in an eligible area:  USDA Website. 

There are other low down loan programs available that you may qualify for.  Contact cinda@wvhometeam.com to learn more.
 

  • USDA Rural Development Department offers a direct mortgage as well as a government guaranteed loan.
  • There isn't a loan limit for USDA financing.
  • The income limit affects how much of a loan you can qualify for.
  • In Maricopa County the maximum income is $74,750 for up to a 4 person household (some variances apply, please speak with a mortgage professional).
  • Like VA loans, USDA loans do not require a down payment.
  • The properties that are eligible for USDA financing is limited as only certain rural areas qualify for USDA loans, such as Buckeye.
  • USDA loans are great for buyers that do not have a down payment but good credit.

Conventional Loans

  • A conventional loan is a loan secured by investors that it is not insured by FHA or guaranteed by VA. Often called a non-government sponsored entity (non GSE) loan.
  • In Maricopa the maximum loan limit for conventional loans is $417,000.
  • In general 5% down payment required.
  • In most cases 100% of the down payment can come from a gift.
  • Both fixed and adjustable rate loans are available.
  • Private mortgage insurance required if down payment is less than 20%.
  • Best for buyers with great credit scores and money available for a down payment.

If you are looking to buy a home soon your first step should be to speak to a mortgage professional about the programs you can qualify for. Your credit, savings and income greatly affect which program will work best for you. If you would like the contact information for some local mortgage professionals please feel free to contact us at 623-252-9350.