Landing the loan

Single-family residential loans come in various forms, each tailored to different borrower needs, credit profiles, and property goals. Below is a breakdown of the primary types of loans available for purchasing or refinancing single-family homes:

 

Conventional Loans

• Definition: Loans not insured or guaranteed by the federal government.

• Key Features: Typically require a 3% to 20% down payment and good credit (minimum FICO score of 620).

• Use Case: Suitable for borrowers with strong credit and stable income.

 

FHA Loans (Federal Housing Administration)

• Definition: Government-backed loans for low-to-moderate income borrowers.

• Key Features: Minimum 3.5% down payment, lower credit score requirements (as low as 580).

• Use Case: Ideal for first-time buyers or those with less-than-perfect credit.

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VA Loans (Department of Veterans Affairs)

• Definition: Loans available to eligible veterans, service members, and their spouses.

• Key Features: No down payment, no private mortgage insurance (PMI), competitive interest rates.

• Use Case: Excellent choice for qualifying military-affiliated buyers.

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USDA Loans (U.S. Department of Agriculture)

• Definition: Government-backed loans for homes in designated rural areas.

• Key Features: No down payment, low interest rates, income limits apply.

• Use Case: Suitable for low-to-moderate income buyers purchasing in eligible rural zones.

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Jumbo Loans

• Definition: Loans that exceed the conforming loan limits set by the Federal Housing Finance Agency (FHFA).

• Key Features: Higher credit scores and down payments required; not eligible for Fannie Mae/Freddie Mac backing.

• Use Case: Used to finance high-value homes, often in expensive housing markets.

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Adjustable-Rate Mortgages (ARMs)

• Definition: Loans with interest rates that adjust periodically after an initial fixed-rate period.

• Key Features: Lower initial rates than fixed-rate mortgages; potential for rate increases.

• Use Case: Best for buyers who plan to sell or refinance before the adjustment period.

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Fixed-Rate Mortgages

• Definition: Loans with a consistent interest rate and monthly payment for the life of the loan.

• Key Features: Predictable payments, terms typically range from 15 to 30 years.

• Use Case: Suitable for buyers seeking long-term stability.

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Bridge Loans

• Definition: Short-term loans used to bridge the gap between buying a new home and selling the old one.

• Key Features: Higher interest rates, typically repaid quickly upon sale of existing property.

• Use Case: Ideal for buyers who need fast access to equity before selling their current home.

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Each loan type has its own set of eligibility requirements, benefits, and ideal use scenarios. Understanding these differences helps borrowers make informed decisions based on their financial situations and long-term homeownership goals.