Knowing the differences between types of loans and having a good idea of which one is right for you can save you a ton of time during the mortgage application process. If you have any questions about the types of financing available, feel free to give us a call at 702.796.4790. We work with several extremely reputable lenders in the Las Vegas area who will be more than happy to answer your questions.
While FHA & VA loans are insured through the federal government, conventional loans are insured through private companies. You can obtain one from just about any lender, such as a mortgage company or a bank. The fees and additional costs associated with a conventional loan will vary depending on the mortgage lender.
Because conventional loans are a higher risk for lenders. you must often meet more stringent credit and income requirements than those who finance their properties using an FHA or VA mortgage. A credit score of less than 620 typically will disqualify a potential borrower from obtaining financing, and a 5-20% down payment is required. Conventional loans are available for occupants and investors.
Once you're approved for conventional financing, processing typically takes less time than with government-backed loans. The higher down payment requirement will also help you build equity more quickly.
HomePath financing is only available on Fannie Mae-owned properties. The housing crisis of 2008/2009 left Fannie Mae with an abundance of foreclosed properties in their inventory. Requirements for a HomePath mortgage are more stringent than with other types of loans, but the terms are very favorable for those with a credit score of 660 or higher. With good credit, only a 3% down payment is required. In addition, no mortgage insurance or lender-requested appraisal are needed. Expanded seller contributions towards closing costs are also allowed.
Buyers are able to use "gifted" money for the down payment, which is typically not allowed for conventional financing.
This type of loan is available for both investors and owner occupants, although the credit and down payment requirements may vary depending on your situation.
For homes that are not move-in ready, HomePath offers a renovation mortgage that includes both the funds for the purchase and renovation — up to 35% of the as completed value, but no more than $35,000.
FHA loans are backed by the Federal Housing Administration and require a smaller down payment than other types of loans (typically 3.5-4%). Buyers are able to use "gifted" money for the down payment, which is typically not allowed for conventional financing.
Also unlike other loans, a credit score less than 620 doesn't disqualify you from obtaining financing. In addition, you can qualify for FHA loans one year after Chapter 13 bankruptcy, two years after Chapter 7 and three years after a foreclosure.
FHA mortgages are typically 30-year mortgages, in which each payment consists of money toward the principal amount, interest, real estate taxes and mortgage insurance. FHA loans are only available for owner-occupied properties, not investment properties.
One downside to FHA financing is you're required to have mortgage insurance. FHA mortgage insurance is charged both as a fee at closing as well as each month as part of your regular loan payment.
VA loans are reserved for military service members and veterans, their spouses, and other select beneficiaries that can obtain a Certificate of Eligibility (COE). Although these loans are strictly for owner-occupied properties, they can be used to purchase an existing home, build a new home, simultaneously purchase and renovate a home, buy a manufactured home and/or lot, or make energy-efficient improvements to a home.
One of the benefits of the VA loan program is its relaxed credit requirements. The VA loan program seeks to accommodate as many military buyers as possible with a simple and accessible mortgage. Most VA-approved lenders require a credit score of at least 620 to obtain financing.
Another huge benefit to VA funding is it does NOT require a down payment, and there is no monthly mortgage insurance. However, a funding fee is required at the time of closing. The funding fee is a percentage of the loan amount which varies based on the type of loan and your military category, if you are a first-time or subsequent loan user, and whether you make a down payment. You have the option to finance the VA funding fee or pay it in cash, but the funding fee must be paid at closing time.