Financing Options

USDA Rural Development Financing 

A USDA loan (also called a Rural Development Loan) is a government insured home loan that allows you purchase a home with NO Money Down. USDA Loans offer 100% financing to qualified buyers, and allow for all closing costs to be either paid for by the seller or financed into the loan. USDA offers some the lowest rates of any loan, and you will always have a fixed interest rate

FHA Loans

A loan insured by the Federal Housing Administration open to all qualified home purchasers. While there are limits to the size of FHA loans, they are generous enough to handle moderate-priced homes almost anywhere in the country.

FHA loans typically offer options for first-time home buyers, senior citizens and home improvements.  One of the most difficult elements of the home buying process is saving up enough money for a down payment.  If you are a first-time home buyer, an FHA loan may allow you to make a down payment of 3 percent.  You may also be able to roll your closing costs and other fees into the loan amount.
If you are interested in a home that requires some improvements, there is an FHA loan to address your needs.  An FHA approved lender will check your creditworthiness and if you meet their standards, you will be approved for a loan that covers the cost of the property, plus home improvement costs and closing costs.  You may also be able to get an FHA loan if you already own a home that needs some repairs and improvements.  The loan will cover refinancing costs as well as the costs of making the necessary improvements.

VA Loans

A mortgage loan made by an approved lender and guaranteed by the Department of Veterans Affairs. They are made available to eligible veterans, those currently serving in the military, and, in some case, their spouses.

A VA loan differs somewhat from a standard mortgage. Even though it is provided through a private lender, the federal government guarantees a portion of the principal. That means that the Department of Veterans Affairs backs the loan, so if the borrower defaults on it, the lender is protected. Borrowers who are eligible for a VA loan are permitted to have a small, or sometimes non-existent, down payment and still get a mortgage. This is the biggest advantage of a VA loan. Be sure to ask your lender what its down payment requirements are when requesting a VA loan.

Some of the requirements for a VA loan are standard, as with any loan: good credit, enough funds for payments, etc. Another is that you must be eligible though your affiliation with the military.

Conventional Loans

Mortgages not guaranteed or insured by the above government agencies are known as conventional mortgages.  These mortgages adhere to Fannie Mae guidelines. Fannie Mae, or Federal National Mortgage Association, is a corporation created by the federal government that buys and sells conventional mortgages. It sets the maximum loan amount and requirements for borrowers.

Usually, a conventional mortgage is a 30-year fixed rate loan.  That means it has a fixed interest rate for the 30 year term of the mortgage.  Conventional mortgages also typically require at least a 20 percent down payment.  For example, if a house costs $200,000, the lender will provide a loan for 80 percent of that amount.  So, $160,000 is financed through the lender and the borrower must pay $40,000 cash.

Conventional mortgages can have better interest rates than non-conventional mortgages and can be a great option for those with the 20 percent down payment.  However, even if the borrower does not have a 20 percent down payment, it is still possible to get a mortgage.  Some financial institutions offer in-house fiancing as an option, the interest rate is usually much higher than the other loan options.