Conventional loan refers to any loan that is not insured or guaranteed by the federal government, as opposed to government-insured home loans including FHA loans, VA loans, and USDA loans. Conventional mortgage loans (conforming or non-conforming) typically have a slightly higher down payment requirement than government loans; however, this option normally provides more flexibility and fewer restrictions.

What Is a Conventional Loan?

-If you have good credit and a stable income, a conventional loan might be the right option for you, since conventional loan programs traditionally offer:

- Lower interest rates for borrowers with good or great credit

-Flexible mortgage insurance options, if applicable (mortgage insurance not always necessary)

- Fewer penalties and fees

-Flexible loan terms

- Down payments range from 3% - 20%

An FHA loan is a mortgage that is insured by the Federal Housing Administration (FHA), a government agency within the Department of Housing and Urban Development (HUD). The FHA was created in 1934 to help stimulate the housing market and increase homeownership by providing mortgage insurance to lenders who make FHA-insured loans.

One of the main benefits of an FHA loan is that it allows borrowers to make a down payment of as little as 3.5% of the purchase price of the home. This is significantly lower than the down payment required for most conventional mortgages, which can be as high as 20%. FHA loans also have more flexible credit score requirements, allowing borrowers with lower credit scores to qualify for a mortgage.

A VA mortgage loan is a home loan that is guaranteed by the U.S. Department of Veterans Affairs. A VA loan makes it easier for veterans, active duty military members, and eligible surviving spouses to purchase or refinance their homes because it typically doesn't require a down payment.*

The VA offers this benefit to honor the service and enhance the lives of those who have served or are serving their country.

The flexible VA mortgage loan guidelines make homeownership more attainable for active service members, vets, and surviving spouses who might not qualify or who might not see loan terms as favorable as a Conventional loan.

VA Mortgage Highlights

VA home loans often require no down payment* and help keep your savings secure and offer more flexibility for active-duty military personnel, veterans, and eligible surviving spouses. They also feature:

- No prepayment penalties

- No private mortgage insurance (PMI)

- 100% financing with full VA entitlement*

- Fixed- and adjustable-rate mortgages

- VA financing fees can be lumped into the total loan amount

- A variety of eligible property types, including townhomes and VA-approved condos

*A down payment is required if the borrower does not have full VA entitlement or when the loan amount exceeds the VA county limits. VA loans are subject to individual VA Entitlement amounts and eligibility, qualifying factors such as income and credit guidelines, and property limits.

USDA loan is a zero-down payment financing option for eligible rural and suburban home buyers. It is a non-conventional loan insured through a government agency, (a segment called the USDA Rural Development Guaranteed Housing Loan Program), and was created to help improve the economy and American rural quality of life.

Because the loan is insured by the USDA, lenders can offer loans to home buyers with less-than-ideal credit because the USDA can guarantee a portion of the mortgage in case a borrower defaults on the loan.

The purpose of the program was to enable low-to-moderate-income families the opportunity to secure a home loan. A USDA loan can help you finance construction on a new home, purchase a recently built home, or buy an older home. USDA loans are widely available and are a great source of financing because they have no down payment, reduced mortgage insurance premiums, and lower mortgage rates.

Benefits of a USDA Loan

-In addition to affordable home ownership, there are a variety of other benefits to using the USDA loan program. Some of the great benefits are:

- 0% down payment

- Low loan costs and low-interest rates

- Low private mortgage insurance (PMI) rates, with the ability to finance PMI

-Flexible credit guidelines

There are various down payment assistance programs that aim to bridge the affordability gap. Assistance can come in the form of grants, low interest rates, or forgivable loans, making homeownership more attainable for those with limited financial resources.

This genre of loan is geared towards investors and uses debt service coverage ratio, a financial metric, to assess an entity’s ability to generate enough cash to cover its debt service obligations.

For borrowers with unique financial situations, non-qualified mortgage loans provide an alternative. These loans don’t conform to traditional standards set by Fannie Mae or Freddie Mac , allowing for more flexibility in underwriting.

Those with irregular income, who are self employed, or recovering from a financial set back can often take advantage of these loans, however, they often accompany higher interest rates & may require larger down payments.

These are specialized home loans designed for purchasing high value properties that exceed the conforming loan limits set by Fannie Mae and Freddie Mac. This loan type caters to individuals seeking luxury homes in high cost areas where standard loan limits are insufficient. The approval process can be more intense, requiring robust credit histories, substantial down payments, and demonstrated ability to handle increased financial responsibility.