When it comes to buying a home, there are a variety of residential loan options available to prospective homeowners. Understanding the different types of loans and their qualifications can help buyers make an informed decision about which loan is best for them. Here are some of the most common types of residential loans and the scenarios in which they may be a good fit.
Conventional Loans: These loans are not insured by any government agency and are the most popular type of mortgage. To qualify, buyers typically need a credit score of at least 620, a down payment of at least 3%, and generally a debt-to-income ratio of no more than 50%.
FHA Loans: These loans are insured by the Federal Housing Administration and are designed to help first-time homebuyers and those with lower credit scores. To qualify, buyers typically need a credit score of at least 580, a down payment of at least 3.5%, and generally a debt-to-income ratio of no more than 57%.
VA Loans: These loans are available to eligible veterans and their spouses and are guaranteed by the Department of Veterans Affairs. To qualify, buyers must meet certain service requirements, but they do not need a down payment or private mortgage insurance.
USDA Loans: These loans are backed by the US Department of Agriculture and are designed for buyers in rural areas who have low to moderate incomes. To qualify, buyers must meet certain income requirements and purchase a home in a designated rural area. Take a look at this map and see if a particular address is designated “rural” for USDA eligibility. If you are purchasing in Mississippi, most areas are USDA eligible.
Jumbo Loans: These loans are for amounts that exceed the conforming loan limit set by Fannie Mae and Freddie Mac. To qualify, buyers typically need a credit score of at least 700 and a down payment of at least 10%.
The type of loan that is best for a buyer depends on their individual circumstances, such as credit score, income, and the location of the home they wish to purchase.
Cozy Hosea Homes Realty LLC is not a mortgage lender, mortgage broker, nor gives specific mortgage advice. We recommend speaking with a lender or mortgage broker to determine which loan option is best for your specific situation!
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