Which Loan Should You Choose: Conventional, FHA or VA?

Which Loan Should You Choose: Conventional, FHA or VA?

Difference between conventional, VA and FHA Loans

Now-a-days, when time and market is changing rapidly, everyone knows that it is very tough to get the finance from the market. So, to take the loan from the market, one has to understand various types of loans available. There are many types of loans as conventional loans, VA loans and FHA loans. Now it depends on the borrower which type of loan he wants to choose. In terms of VA, FHA and conventional loans, government backs them but it does not back conventional loans. Generally these government backed loans are always very beneficial as they always provide some financial benefits to the borrower. Let us understand these loan options in details.

Conventional loan:-

It is a loan or mortgage which is provided by lenders to borrowers to those who fall in certain criteria. These criteria are usually stable job, down payment, credit scores, cash reserves etc. but are not limited to it. Among all the borrowers and lender checks, who has maintained good credit score, gets good or best interest rates. So if a borrower is going to purchase a home, the down payment will be 3%, and credit score needs to be 660 if manually underwritten or none, in case of underwritten electronically. Upfront fees will be 0.75% and mortgage insurance will be 0.65% to 1.62% per year. If a homebuyer is going to refinance these rates differing like maximum loan to value 97%, upfront fees will be 0.75% and mortgage insurance will be 0.65% to 1.62%. Conventional loan is not insured by the federal government. In case of failure of repayment of loan by the borrower, the lender has no security to recover it. So if a borrower takes the conventional loan he should have good credit, stable income and affordability of down payment.

VA loan:-

VA loans are government backed loan and guaranteed by the veterans administration. There are VA approved lenders which provides loan to certain borrowers. There are specific set of criteria to get the loan like the borrower needs to be a current member of the U.S. armed forces, a veteran or an eligible surviving spouse. The borrower needs to have a credit score of at least 620. Its effective range of providing loan is $417,000 to more than $1 million. If borrower purchase a home, down payment is 0%, minimum credit score is none, upfront fees is 1.5% to 3.3% funding feeand mortgage insurance is 0% as funding fee works as mortgage insurance while if he refinances, maximum loan to value is 100%, upfront fee same as at the time of purchase, mortgage insurance is 0% because of funding fee.

FHA loans:-

This is a loan approved by the federal housing administration for certain borrowers who match the criteria. In this, a borrower has to give minimum down payment of 3.5%. Upfront mortgage insurance premium and annual premium will be paid by the borrower together. When a borrower is going to take a loan for purchase, down payment will be 3.5% and for refinance maximum loan to value is 97.50%. Criteria to get the loan are: 2 years of stable job, credit score should be 580 or more and in some special cases not at all.


  • The Rueth Team
    Posted at 05:18h, 05 December Reply

    Great post! Many thanks for sharing the difference between conventional, VA and FHA loans. Keep sharing this types of an informative blog.

  • Gerty Gift
    Posted at 15:47h, 20 December Reply

    Thank you for explaining the criteria for the FHA loan. My husband and I have been discussing this one, but couldn’t remember if we fit the criteria exactly. It’s good to know that we do fit in the criteria and could be approved for this option.

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