Financing: The Basics

According to the VA Home Loan Center “Home prices in the U.S have risen 3 percent to 6 percent a year for the past 20 years.”

Buying a home is often the biggest purchase a person will make in his/her lifetime. Because of this, most people require financing in order to purchase a house. Thankfully there are a lot of great options available to home buyers. Keep scrolling to learn the basics about a few of the most popular loan options.

Conventional Loans

These are one of the most popular options on the market. Typically they require a 20% down payment, but in some cases can be as low as 5%. They normally have a fixed interest rate, and can be a 15 year or 30 year loan term. Conventional loans usually require a stronger credit history, lower Income-To-Debt Raito, and a larger down payment.

Federal Housing Administration (FHA) Loans

FHA loans are backed by the HUD (US Department of Housing and Urban Development). FHA loans allow for a lower down payment (can be as low as 3.5%), and less stringent credit history. It can be a great option for first time home buyers, or for someone who wants the option for a smaller down payment. FHA loans do however require mortgage insurance premiums (MIP), which can increase the monthly mortgage payment.

VA Loans

VA loans, according to the VA’s website, “helps Servicemembers, Veterans, and eligible surviving spouses become homeowners. ” It allows qualified borrowers to purchase a home with favorable loan terms, and often no down payment. This can be a great option for those who are eligible to obtain a VA loan. It does require a “Certificate of Eligibility” from the VA in order to qualify for this type of loan.