A conventional loan is not associated with the FHA, USDA, or VA. It generally requires at least 5% down (though it can be as low as 3% for some buyers), but private mortgage insurance (PMI) is required for down payments of less than 20%. Paying PMI will add to the cost of your monthly payments.

 

Pros

• No PMI required if down payment is 20% or more

• Larger down payments may help build home equity earlier

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Cons

• PMI is required for down payments under 20% 

• More difficult requirements for income and credit score

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Uses

• Available for most types of property, including second home and investment properties

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Because FHA loans are insured by the Federal Housing Administration (FHA), it’s easier to qualify for them. That makes them attractive to first-time buyers, borrowers with low to moderate incomes, and buyers with lower credit scores or higher debt-to-income ratios. FHA loans also tend to have lower down payments (as low as 3.5%), lower monthly insurance premiums, and often lower closing costs.
 

Pros

• Easier requirements for income and credit score

• Minimum down payment: 3.5%

• Mortgage Insurance Premium may be less costly than PMI

• Lower closing costs

• Seller can contribute up to 6% of sale price to help cover closing costs. 

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Cons

• MIP required

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Uses

• Buy, build, or refinance houses, approved condos, modular homes, and manufactured homes with pre-approval

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Offered as a benefit to active and retired U.S. military personnel, VA loans are guaranteed by the U.S. Department of Veteran Affairs. Like FHA loans, they are easier to qualify for (if you are an eligible veteran) and have lower costs and more liberal terms.
 

Pros

• Easier requirements for income and credit score

• No down payment

• Lower closing costs

• Interest rates may be negotiable

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Cons

• Must be an eligible veteran or unmarried surviving spouse of a veteran who died on active duty or as the result of a service-connected disability

• VA Funding Fee may be required

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Uses

• Purchase, construction, or energy-saving improvement (approved by lender and VA) of a home

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Guaranteed by the United States Department of Agriculture (USDA), these loans offer an affordable way to purchase property in rural neighborhoods. These are non-urban areas, but often include villages or small towns near bigger cities. The loan term is a 30-year fixed-rate mortgage.
 

 

Pros

• No down payment

• Allows for non-traditional credit

• Lower closing costs, with no limit on contributions from seller or gift money

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Cons

• Must meet USDA location standards

• USDA Guarantee Fee is required

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Uses

• Owner-occupied single family housing

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Insured by the Federal Housing Administration (FHA), the Standard 203(k) covers repairs of more than $35,000, including structural work. You can borrow funds to pay for upgrades, to reconstruct a home that is currently unlivable, or to tear down an existing structure and build a new one on some portion of the existing foundation.  Allowable improvements include structural alterations and reconstruction, major landscaping, and site improvement.
 

Pros

• Minimum 3.5% down payment 

• Borrow up to 96.5% of projected value after improvements are done

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Cons

• Mortgage Insurance Premium (MIP) required

• Primary residence, owner-occupied homes only

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Uses

• Improvements for your current house or a fixer-upper that you buy

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When You Need a Loan Above the Conforming Limit
 

You’re ready to buy a home but live in one of the nation’s priciest housing markets. Inventory is low. Demand is high. And homes routinely cost over $1 million.

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WHAT CAN YOU DO WHEN YOU LIVE IN A HIGH-PRICED AREA?

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Get on the phone and talk to a lender about taking on a jumbo mortgage.

A type of non-conforming loan, jumbos in most housing markets can buy you a home worth more than $647,200 — the limit for “conforming loans” supported by mortgage giants Fannie Mae and Freddie Mac. Non-conforming loans are any that exceed that funding limit.

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In some high-priced markets, the minimum financing threshold starts at $822,375.

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VIP MORTGAGE GROUP  IS EXPANDING OUR JUMBO LOAN PRODUCTS

VIP has investors ready and willing to fund these types of loans, and a secondary marketing department creating jumbo options for a variety of localities and home buyer needs.

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