Comparison of Four Popular Loan Types

Which Loan Program is Right for You?

Comparison of Four Popular Loan Types: Conventional, FHA, USDA, and VA

 Conventional*FHA*USDA*VA*
Minimum Down Payment3% (can be homebuyer's and/or gift funds)3.5% (can be homebuyer's and/or gift funds)0%0% (as long as the sales price doesn't exceed the appraised value)
Maximum Seller Assist3% (<10% down payment)
6% (>10% down payment)
6%6%6%
Mortgage Insurance (MI)Private Mortgage Insurance (PMI): Dependent on credit score, down payment, loan purpose, and loan term

Two forms of insurance:

  1. Upfront Mortgage Insurance Premium (UFMIP): Factored at 1.75% of the base loan amount (can be financed in the loan);
    AND
  2. Monthly Mortgage InsurancePremium (MIP): Usually factored at 0.85% of the base loan amount

Two forms of insurance:

  1. One-time, upfront charge or guarantee fee: Factored at 2% of the base loan amount (can be financed in the loan);
    AND
  2. Monthly USDA fee: Factored at .50% of the base loan amount

Funding Fee: One-time, upfront charge that must be paid at closing but may be financed in the loan. Factored as a percentage of the loan amount, which varies based on the type of loan, the oborrower's military category, etc.

Potential Advantages
  • Mortgage insurance can be canceled once 2 years have elapsed and 20% equity is achieved.
  • Can use gift funds for down payment.
  • Less money out-of-pocket.
  • Lower credit score requirements.
  • Less stringent income requirements.
  • Can use gift funds for down payment.
  • Less expensive MI costs than FHA and Conventional Loans.
  • Little to no money out-of-pocket.
  • Can use gift funds to lower the monthly payment.
  • No monthly MI required.
  • Little to no money out-of-pocket.
  • The seller can pay for some closing costs.
  • VA rules limit the amount charged fro closing costs.
Potential Disadvantages
  • May have higher MI costs than FHA and USDA Loans.
  • Higher credit score requirements.
  • More stringent income requirements.
  • Higher MI costs than USDA Loans but may be lower than Conventional Loans
  • MI included for life of the loan and cannot be canceled.
  • Monthly guarantee fee included for life of the loan.
  • More stringent income requirements.
  • Only allowed in designated rural areas.
  • Upfront funding fee.
  • Veteran must be income and credit-qualified.

Call your Academy Loan Officer to discuss the right loan product for you.

See sample scenarios here
 
 

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