FHA Loan
The Federal Housing Administration (FHA) manages the FHA loan program. If you are a first-time home buyer, this type of mortgage may be best for you.
FHA loans offer several advantages because they are insured by the federal government, plus:
- They have less strict requirements.
- Low credit score of at least 580
- 3.5% of down payment and 10% with a score of 500
- They allow Debt-to-Income ratio (DTI) of up to 43%
- They have lower closing costs.
- Initial Private Mortgage Insurance (PMI) of 1.75% of the loan amount. PMI premium plus closing costs may be included in the mortgage total.
- Find an FHA-approved bank or lender.
- You don’t have to be a first-time homebuyer to use an FHA loan; current homeowners are also eligible.
- Maximum amount depends on the State and County where it is purchased, in 2024 for Florida it is $929,200 in Monroe County, $621,000 in Miami-Dade and Broward and $498,257 the most common value for the other counties.
VA Loan
A VA loan is a type of loan from the federal government, guaranteed by the Department of Veterans Affairs (VA).
The VA does not give VA loans, but it does determine who qualifies and what lender they can give you.
VA loans are considered non-conforming loans due to easier credit requirements. They offer more advantages than conventional loans, including:
- The VA mortgage rate is typically 0.25% to 0.42% lower than rates on conventional 30-year fixed-rate loans
- Less strict loan requirements
- The 2023 loan limit for the United States is $726,200
- They do not have down payment
- They do not have Private Mortgage Insurance (PMI)
- It must be a primary residence and a single-family home.
- A Certificate of Eligibility (COE) is required based on the benefit of being a veteran, surviving spouse, or active duty military member under certain defined conditions.
- The VA financing fee varies between 2.3% and 3.6% of the loan amount.
Conventional loan
A conventional loan is any mortgage loan that is not insured or guaranteed by the government, they can be conforming or non-conforming.
Requirements for conventional loans:
- The Down payment can vary from 3%, depending on the personal situation and the type of loan or property being purchased.
- If the down payment is less than 20% you must have Private Mortgage Insurance (PMI)
- A credit score of no less than 620 is required
- Debt-to-Income (DTI) Ratio must be 50% or less.
- The limit must be as established by Fannie Mae and Freddie Mac, for the year 2024 the average for a single-family home is $726,200.
- The lender requires an appraisal of the property to be purchased.
- The interest rate is established by the lender according to the competition and can be fixed or variable.
- The term is defined together with the lender and can be up to 30 years
USDA Loan
A USDA home loan is a competitively priced mortgage option that helps purchase a home to be more affordable for low-income people who live in USDA-designated and eligible rural areas. The United States Department of Agriculture supports these loans.
USDA Loan Requirements:
- There are no Down Payment options
- They qualify for interest rates as low as 1%.
- Must be a property in a specified, USDA-eligible locality
- It must be a primary residence and you must live in it
- You must be a US resident, non-citizen national, or permanent resident alien.
- The property must be in rural areas or on the outskirts of suburbs.
- USDA loans are for families who demonstrate financial need, adjusted gross income cannot exceed 115%
- Debt-to-Income (DTI) Ratio must be 43% or less.
- Credit score of 640 or better.
- Private Mortgage Insurance (PMI) for the entire duration of the loan
- The lender requires an appraisal of the property to be purchased.