FHA LOANS
FHA loans are insured by the US Government. The main selling point of an FHA loan is the 3.5% minimum down payment requirement. However, in order to qualify for an FHA loan, there are minimum credit requirements. The FHA loan limits vary by county in Texas with most counties capping FHA loans at $531,300. For a complete list of county limits, please click here.
One of the drawbacks is all FHA loans are subject to both an upfront and annual Mortgage Insurance Premiums (MIP).
FHA loan offerings are pretty basic. They offer both purchase money mortgages and refinance loans, but the choices are limited. In other words, you will most likely have a 30-year or 15-year fixed rate mortgage or an adjustable rate mortgage (ARM).
conventional loans
Generally speaking, conventional loans tend to offer more variety. With a conventional loan, which includes both conforming and non-conforming loans, you can obtain almost anything from a 1-year ARM to a 30-year fixed rate mortgage and everything in between. So if you are looking for a 10-year fixed rate mortgage or a 7-year ARM, a conventional loan would be the right loan for you. For conforming loans, conventional loans are capped at $766,550. For non-conforming conventional loans, there are no caps on loan amounts so for those with jumbo loans (over $766,550), a conventional loan would be the only way to obtain financing.
Generally speaking, a borrower would need stronger credit to qualify for a conventional loan as opposed to an FHA loan.
On conventional loans, you won’t be subject to mortgage insurance premiums if you have at least 20% equity. Even if you are unable to put 20% down, there are some low down payment programs that don’t require mortgage insurance.
Conventional mortgages typically require a down payment between 5% and 20% so low down payment borrowers should consider FHA loans first.
Conventional mortgages are also accepted everywhere, whereas some condominium communities won’t accept FHA financing. The same goes for non-owner investment properties so sometimes you may not have a choice but to go with a conventional loan.
va loans
Almost all active duty and honorably discharged service members are eligible for a VA Home Loan. You may be eligible if any one of the following are apply:
Served 181 days during peacetime (Active Duty)
Served 90 days during war time (Active Duty)
Served 6 years in the Reserves or National Guard
You are the spouse of a service member who was killed in the line of duty
In most instances, the VA mortgage still allows the borrower to finance 100% of the home’s value and purchase with no money down. PMI, or private mortgage insurance, is not required on a VA loan. PMI is an added monthly expense required for conventional loans where the borrower finances more than 80% of the home’s value. Mortgage Insurance Premiums are also a requirement on all FHA Loans.
Interest rates are also lower with a VA Loan, typically 0.5% - 1.0% lower than a conventional loan. A lower rate combined with monthly PMI savings can substantially lower your monthly payment.
Qualification guidelines are less stringent for VA mortgages. Because VA Loans are backed by the government, banks have relaxed the often strict lending rules for VA loan applicants making VA Loans easier to obtain.
While FHA, Conventional and VA loans are the most common types of loans, please ask about other loan options that may be available for certain specific individuals and specific areas.
We offer several other loan products so if you don't see what you're looking for, please give me a call and I will assist you with identifying the best loan product for your specific needs.