FHA, VA, and USDA mortgage loans are government loans, because they are backed by the United States government. All other mortgages are conventional loans.
FHA loans are administered by the Federal Housing Administration (FHA), part of the U.S. Dept of Housing and Urban Development (HUD). FHA administers mortgage loan programs with lower down payment requirements that are easier to qualify for than conventional loans. FHA loans can’t exceed the statutory maximum loan limit base on a property’s location. The loans are made by private lenders and then insured by FHA. FHA loans are attractive to first-time home buyers, lower income borrowers, and those with limited down payments. This programs offers more flexible qualification guidelines.
VA loans are also made by private lenders, but are guaranteed by the U.S. Department of Veterans Affairs (VA). This guarantee allows veterans and service personnel to obtain a home loan with favorable terms and usually without a down payment. It’s easier to qualify for a VA loan than a conventional one, but lenders generally limit the maximum loan amount to conforming limits. The VA determines your eligibility based on your service, but you still apply to private lending institutions.
USDA loans are guaranteed by the U.S. Dept of Agriculture. Eligible homes must be located in rural areas and confirmed on USDA’s website. The program allows for no down payment, and if the value is sufficient you may even be able to finance in some of the closing costs. This program has income limitations.
Conventional loans are either conforming or non-conforming. Conforming mortgage loans offer a lower interest rates, but must conform to certain maximum loan limits and guidelines. Non-conforming loans, are also called Jumbo loans, are for loan amounts greater than the conforming loan limits. The interest rates are generally higher and the qualifying guidelines vary based on the investor.
If you’d like more information about any of these loans programs for your home purchase, please give us a call. We would be happy to get you pre-qualified for your first home, or next home!