There are plenty of loan types out there, and which one is right for you can depend on lots of factors. The down payment you can afford, credit score, income and where the property is located can all come into play when choosing a loan program.
Below is some information about several of the most common loan types:
A conventional loan is any that is not insured or guaranteed by the federal government (FHA loans are government insured, USDA and VA loans are guaranteed). However, in common usage conventional loan means only mortgages that conform to the guidelines set by Fannie Mae and Freddie Mac, two Government Sponsored Enterprises that provide liquidity to the housing market.
FHA Loans are insured by the Federal Housing Administration. FHA loans have less strict credit score and down payment requirements than conventional loans, they are also typically one of the first loans that becomes available after a housing event (short sale, foreclosure or bankruptcy).
A Veteran’s Administration (VA) loan is a Federally guaranteed loan that is available to eligible active, non-active, Reserve, National Guard and retired members of the armed services and, in some cases, the widowed spouse of a veteran.
Jumbo loans are those that exceed the limits set by Fannie Mae and Freddie Mac and therefore cannot be purchased by either enterprise.
A USDA rural housing loan is a loan guaranteed by the United States Department of Agriculture. These loans are available to buy or build properties located in designated rural areas. USDA loans are for owner occupied primary residences only and do have income requirements that must be met to qualify.
A reverse mortgage is available only to homeowners age 62 and older. In this type of loan, some of the existing equity in the home is paid out in either a line of credit, lump sum or multiple payments.